Preamble

The House met at half-past Two O'clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — NATIONAL FINANCE

Competition in Credit

Mr. Norman Lamont: asked the Chancellor of the Exchequer if he is satisfied with the working of the policy of competition in credit.

The Minister of State, Treasury (Mr. John Nott): Yes, Sir. The changes have resulted in a welcome increase in competition and innovation in the banking sector.

Mr. Lamont: I accept that the principles in the Green Paper have had a good effect on the economy in waking up the banking sector, but does my hon. Friend not agree that there is some anxiety that even the present high level of interest rates will not be sufficient to enable the Government to reach the declared objective of moderating the rate of increase in money supply? If further increased rates are necessary to achieve this and to sell more Government securities to the non-banking public, will the Government allow this to happen, or will they consider resorting to other types of control over particular types of lending?

Mr. Nott: I cannot make any forecasts or comments about the future course of interest rates, but the weapons available under the new monetary arrangements are adequate. A return to ceilings on bank lending in the private sector would stifle competition and in any event would have severe limitations as a monetary tool.

Mr. Hordern: Will my hon. Friend accept that it is undesirable to revert to a system of credit control by sector, and

that to do so could only have the effect of increasing interest rates? If there is one sector that needs to be controlled, it is that of Government expenditure.

Mr. Nott: We debated Government expenditure a week or two ago. I agree with my hon. Friend that the main effect of selective controls would be to alter the channels through which finance flows, and in less efficient directions. Ceilings—which existed under the Labour Government—do not represent a viable alternative to the use of interest rate to control money supply, particularly in the present conditions of very strong demand for credit.

European Monetary Union

Mr. Marten: asked the Chancellor of the Exchequer what change there has been in the proposals for an EEC monetary union.

The Chancellor of the Exchequer (Mr. Anthony Barber): At the meeting on 14th February, the Council of EEC Finance Ministers decided to advance to 30th June the dates for reports on short-term monetary support and conditions for the progressive pooling of reserves.

Mr. Marten: As an interesting comment and as a curtain-raiser to this afternoon's debate, would my right hon. Friend not agree that it is now time to exorcise the illusion that it is in the interests of British people to fix irrevocably the parity of the pound? Surely, with mountains of international money slopping around the world markets, the only rate is the rate that the market will pay.

Mr. Barber: I have already made clear the Government's approach to this problem.

Mr. Healey: The Chancellor of the Exchequer will be well aware that by deciding to maintain the float—a decision of which most of us in the House strongly approve—he has completely broken his undertaking to maintain the "snake-in-the-tunnel" agreement. Does he maintain, after the events of the last nine months, that it is realistic to aim—as the Prime Ministers originally committed themselves—not only at single exchange rates immutably fixed within seven years from now but almost identical tax


systems and a supranational agreement to fix all the major parameters of the national budgets of all the nine member countries?

Mr. Barber: I know that the right hon. Member for Leeds, East (Mr. Healey) stands by the views expressed by his right hon. Friend the Leader of the Opposition when he was Prime Minister——

Mr. Joel Barnett: Come off it.

Mr. Barber: There seems to be a difference of opinion on the Opposition Front Bench. All the Governments of the EEC agree with the need to press on with the work of integrating the economies of the Community, which will make a monetary union possible.

Sterling (Parity)

Mr. Stonehouse: asked the Chancellor of the Exchequer when he now expects to be able to fix a parity rate for sterling.

Mr. Barber: When conditions permit.

Mr. Stonehouse: I appreciate that the floating of the pound has been a great advantage to sterling, particularly in the last few weeks, when an immense amount of hot money has been flowing into Germany, with great embarrassment to the Germany economy, but does not the Chancellor of the Exchequer have a clear commitment to fix a parity within the EEC? When does he intend to make clear that he will fulfil that commitment?

Mr. Barber: We have considered this matter on a number of occasions and I have made it absolutely clear where Her Majesty's Government stand.

Mr. Powell: Is the Chancellor aware that I am quite happy to hear him reaffirm his adherence to fixed rates in principle, so long as he allows sterling to float in practice?

Mr. Barber: If my right hon. Friend is happy with one aspect of the Government's policy, I am very happy for him.

Mr. Jay: Does a fixed but adjustable rate, which the Government apparently now favour, mean a rate of exchange which can be altered whenever we wish?

Mr. Barber: I do not understand what the right hon. Gentleman is saying when he uses the expression "which the Gov-

ernment now favour". It is the policy that this Government throughout have favoured.

Mr. Sheldon: Will the right hon. Gentleman confirm that he intends not to fix the exchange rate until inflation is under control?

Mr. Barber: I have said before that in considering this matter the totality of conditions affecting any exchange rate will obviously be taken into account.

Value Added Tax

Sir G. Nabarro: asked the Chancellor of the Exchequer what loss of revenue is entailed in reducing the inaugural rate of value added tax to five percentum only; what consideration of income standstill policy he will consider in that connection, having regard to the inflationary effect of value added tax at any higher rate than five percentum; and whether he will make a statement.

The Chief Secretary to the Treasury (Mr. Patrick Jenkin): On the basis of the estimate published in last year's financial statement, introduction of VAT at a rate of 5 per cent. would reduce the full year yield by over £700 million. In deciding upon the initial rate of VAT in the context of his Budget my right hon. Friend will have regard to all relevant considerations.

Sir G. Nabarro: Without expecting my hon. Friend to be anticipatory in present circumstances, may I remind him of the extreme attractiveness of a rate of 5 per cent. now that the freeze has been widely accepted in this country and that all quarters of opinion generally support it—since a 5 per cent. rate would be generally within the freeze conditions?

Mr. Jenkin: I agree with my hon. Friend that the Government's counter-inflation policy enjoys a great measure of support in the country. My hon. Friend also knows that my right hon. Friend the Chancellor of the Exchequer receives a variety of cogent and attractive advice which is not always mutually consistent. But we pay the closest attention to it all.

Mrs. Castle: Is the hon. Gentleman aware that any rate will be inflationary, because it will be abused? Is he aware, further, that I have here a pair of children's slippers, bought at the Lincoln


branch of Mothercare a few days ago, carrying a price tag of 70p but having underneath that price tag another tag, ready for the introduction of VAT which reads "Including VAT, 85p", an increase of more than 20 per cent. before the rate of VAT has even been announced? Is not it obvious that mothers will be exploited by this intolerable tax unless the Government remove it altogether from children's clothes?

Mr. Jenkin: I am not sure what sort of happy event the right hon. Lady expects at Lincoln. She will appreciate that I cannot anticipate the judgment of my right hon. Friend the Chancellor of the Exchequer about the coverage of VAT.

Mr. Trew: In view of the fact that even the right hon. Member for Leeds, East (Mr. Healey) has admitted that a 10 per cent. VAT will do little to the cost of living when it replaces purchase tax and selective employment tax, will my hon. Friend resist blandishments to lower the rate, bearing in mind that because of the relief on the necessities of life a reduction will be of greater relative advantage to better-off families than to poorer families?

Mr. Jenkin: I take note of what my hon. Friend says.

Mr. Joel Barnett: Will the hon. Gentleman recognise, first, that he deliberately misled the House the other day when he said in reply to me that there were 950,000 registrations? That was not the truth, and perhaps the hon. Gentleman will apologise. Will he recognise, secondly, that if he were to accept the advice of the hon. Member for Worcestersire, South (Sir G. Nabarro) it would make an even greater nonsense of VAT than it is at present? He would be raising about half the amount that is raised by the two taxes which it replaces. Would not it make more sense, in the present inflationary situation, to take notice of what was said by my right hon. Friend the Member for Blackburn (Mrs. Castle) and postpone the introduction of VAT altogether?

Mr. Jenkin: I apologise if I misled the House. I will look into what the hon. Gentleman says. I gave the latest figures of registrations and applications in the course of the Committee stage of the Counter-Inflation Bill.

Mr. James Lamond: asked the Chancellor of the Exchequer how many letters he has received asking that safety equipment be free of VAT.

Mr. Nott: Eleven.

Mr. Lamond: Is it not nonsense to spend considerable sums of money encouraging safety consciousness and for the first time to introduce VAT on safety equipment which has not previously been subject to purchase tax—for example, fire blankets, fire extinguishers, goggles, safety footwear, respirators, gas masks, helmets, safety harness and machine guards which are designed for protection? Surely there must be a clash of policy somewhere in the Government's thinking.

Mr. Nott: We debated this subject at considerable length on the Finance Bill last year. Safety equipment, as a class, was not relieved in last year's legislation because of the impracticability of finding a satisfactory definition. The hon. Gentleman may recall that we debated at length the question of buckets of sand. I understand what he is saying, but I cannot agree with him, because VAT on safety equipment purchased by registered traders for business use will be recoverable, and many other circumstances apply.

Mr. James Hamilton: Is the hon. Gentleman aware that my trade union, which is the construction section of the AUEW, is deeply concerned about the introduction of VAT on safety equipment? Does he realise that the construction industry, which has the highest accident rate in the whole country, makes extensive use of the articles mentioned by my hon. Friend the Member for Oldham, East (Mr. James Lamond)? On that basis, bearing in mind the number of firms which have gone out of existence because of lack of capital, will the hon. Gentleman reconsider the situation?

Mr. Nott: I do not think that I need comment further at the moment, in view of my right hon. Friend's Budget, which is to be announced in 12 days.

Mr. Sydney Chapman: asked the Chancellor of the Exchequer if he will exclude all income derived by a person from teaching in educational establishments from liability to value added tax.

Mr. Nott: Teaching by employees of educational establishments will be exempt from VAT.

Mr. Chapman: Is my hon. Friend aware that a part-time lecturer will have that portion of his income which comes from teaching VAT-ed under the present proposals? Since he receives fees under contract and the contract cannot be changed, he will have to accept 10 per cent. less in fees. Will my hon. Friend consider that matter and give a favourable reply?

Mr. Nott: I appreciate that my hon. Friend is referring to a self-employed lecturer. Lecture fees would be taxable only if they were in excess of £5,000 a year. I appreciate the particular circumstance which my hon. Friend has brought to my attention. I think that the educational establishment in question may be behaving in a rather harsh manner. I appreciate the case that my hon. Friend has made to my hon. Friend the Financial Secretary and, obviously, we will look into it.

Mr. Barnes: asked the Chancellor of the Exchequer what further representations he has received from charities about the effect on them of value added tax; and what replies he has sent.

Mr. Barber: During recent months, many charities have had useful discussions with Customs and Excise. Representatives of some of the larger charities saw my hon. Friend the Chief Secretary in December, and, together with the Financial Secretary, I myself saw representatives of the National Council of Social Service last Monday. I have noted their views.

Mr. Barnes: But is the right hon. Gentleman aware that the report commissioned by the National Council of Social Service showed that 45 out of 52 charities would be worse off, even allowing for benefits that they received from other taxation changes? Surely the Chancellor can agree that at least goods donated for sale in charity gift shops could be zero rated? This is very important to charities such as War on Want.

Mr. Barber: The representatives of the national council who came to see me fully understood why I could not comment at this time. Therefore, I can only

say that I have noted the hon. Gentleman's views.

Mr. Adam Butler: Will my right hon. Friend confirm that the individual shops run by such organisations as Oxfam will be treated separately, as he undertook to do in the recent debates on this subject? If that is the case, will he confirm that they will then be able to compete more effectively than now with commercial businesses?

Mr. Barber: All I should say at this stage is that this aspect of charity shops was fully debated last year. I agree that it is very important, and I will certainly bear in mind all that is said.

Mr. Healey: Is the right hon. Gentleman aware that this is not a party matter in any way? Many hon. Members on both sides are deeply concerned at the fact that many charities will gain no benefit from the tax changes which the Chancellor announced last year but will suffer heavily from the effect of value added tax on their operations. As I understood it, in the debates that we had on this matter earlier, when the Chancellor refused to give any undertaking, he said he would see how the tax affected these charities, but is he aware that many of these charities may cease to exist after a year of value added tax, if it is applied in the way now proposed? Will he assure us that he will have an announcement to make on this matter in his next Budget, before the tax comes into effect?

Mr. Barber: It was as a result of what I said last year that there have been these very useful discussions between a number of charities and the Customs and Excise. However, with the Budget less than a fortnight away, I certainly could not respond to the right hon. Gentleman.

Football League Clubs

Mr. William Price: asked the Chancellor of the Exchequer whether he will seek powers to establish a fund, financed from football pools betting duty, to assist soccer clubs in Divisions 2, 3 and 4 of the Football League.

Mr. Nott: No, Sir.

Mr. Price: Is the hon. Gentleman aware that the Government are likely to take at least £500 million out of football in the next 10 years from one source or


another? Why does not the hon. Gentleman seriously consider the possibility of setting up a fund from the pools duty to help clubs, some of which face bankruptcy, to develop their grounds into community centres and thereby allow them to live off the income? Is the hon. Gentleman aware that if the Government put back a tenth of what they take out of the game many of football's problems could be resolved?

Mr. Nott: I am not aware of the figures that the hon. Gentleman has mentioned. His Question related to betting duty. This is a source of general revenue, and the hypothecation of revenue for specialised purposes has been contrary to the policy of all Governments. I remind the hon. Gentleman that the pool promoters already pay the Football League £1 million for its copyright fixture lists.

Mr. Concannon: Is the hon. Gentleman aware that with the introduction of VAT a number of Fourth Division clubs—Mansfield Town, Darlington, and others—will be looking for recompense, and that this is one way in which the Government could recompense them against the effects of VAT?

Mr. Nott: I am sure that the hon. Gentleman appreciates that the zero rating for food and other essential commodities was designed to afford relief to the lower-income family. There could not be a similar justification for zero rating on admission charges to football matches and other sports and entertainments.

Safety Prizes (Taxation)

Mr. Eadie: asked the Chancellor of the Exchequer what was the annual income to the Exchequer arising from the taxation of safety prizes for the latest convenient year.

Mr. Patrick Jenkin: This information is not available, but the amount must be very small.

Mr. Eadie: I am obliged to the hon. Gentleman for confirming that it must be small. Is not it deplorable that this should be Government policy, especially when the Government ought to be trying to encourage reasonable efforts by people to be conscious of the need for safety at work? We are talking about a measure which could even save lives by giving

encouragement to firms to induce safety consciousness amongst their workers.

Mr. Jenkin: The Government support any measures for the encouragement of safety, especially in the mines, but I doubt whether it would be practicable to start making special tax rules for safety prizes.

Mr. Concannon: Is the hon. Gentleman aware that there is great resentment about the tax throughout industry—not just the mining industry—which sees this policy as a mean and despicable way of taxing safety at work?

Mr. Jenkin: A prize is taxable if it reaches the taxpayer as a reward for the exercise of his employment or profession. There have been many claims for the exemption of particular incomes by life-boatment and firemen, and overtime earnings, because of the special circumstances of the income. However, the only way to operate a tax system which has to apply to 25 million people is to make broad and comprehensive definitions and stick to them.

Credit Cards

Mr. Robert Taylor: asked the Chancellor of the Exchequer whether he has given further consideration to the inflationary implications of the unsolicited distribution of credit cards; and if he will make a statement.

Mr. Nott: I am not convinced that the unsolicited distribution of credit cards has had inflationary implications. However, restrictions on this method of distribution are being considered as part of proposed consumer legislation.

Mr. Taylor: Some hon. Members would disagree with the first part of that reply. There would seem to be a good case for the introduction of stamp duty on credit cards, which would have the effect of making unsolicited cards invalid and also provide a useful source of added revenue. Will my hon. Friend consider that suggestion?

Mr. Nott: I have noted my hon. Friend's suggestion, but the need for banks to observe the 12½ per cent. minimum reserve ratio and to respond to calls for special deposits means that credit card facilities must be largely at the expense of other forms of credit. The amount of credit involved with credit


cards is very small in relation to total bank lending, in any event.

Dr. Gilbert: I am glad to have the hon. Gentleman's acknowledgement that credit card credit will be at the expense of other credit. In the Government's plans to fight inflation, will they give due publicity to the fact that credit under instalment schemes of these credit cards is much more expensive than ordinary bank credit?

Mr. Nott: The hon. Gentleman is referring to the rate of interest on an annual basis as opposed to the rate of Interest being expressed in another way. His point is well recognised. I am sure that this kind of matter should be given wide publicity.

Mr. Rose: Has the Chancellor any figures at his disposal about the amount spent on National Westminster Bank Access cards, where the sums expended were not backed by amounts deposited with the bank? How many cases of fraudulent use of these cards have there been, since they are to be used only by the authorised signatories, yet they were sent out without any signatures upon them? What has been the additional cost to other users of that bank by reason of those cards being sent out unsolicited and being used?

Mr. Nott: This is a matter between the bank and its customers. It is not for me.

Luncheon Vouchers

Mr. Redmond: asked the Chancellor of the Exchequer whether, in view of the fact that value added tax is to be levied on catered meals, even if paid by luncheon vouchers, he will arrange in his forthcoming Budget for an increase in the amount by which a luncheon voucher may be issued free of tax.

Mr. Patrick Jenkin: I have noted my hon. Friend's suggestion.

Mr. Redmond: I had expected my hon. Friend to say that he could not anticipate the Budget Statement. Will he tell the House when the level was last raised for the re-issue of luncheon vouchers? Despite VAT, is it not due for a review in any case?

Mr. Jenkin: As my hon. Friend recognises, I cannot say anything much in advance of the Budget. The amount of 15p was fixed in 1959. It was never intended to cover the full cost of a meal outside. It was intended to be a contribution towards it approximately equivalent to the subsidy received by an employee who has the benefit of a stall or works canteen.

Mr. Heffer: Is it not clear that this will not hit ordinary working people? Is it not ridiculous that, for example, potato crisps and ice cream will be taxed but caviar is zero rated and will not be taxed? Is not this an absurdity about the tax on foodstuffs?

Mr. Jenkin: The hon. Gentleman has asked his supplementary question on the wrong Question. This Question is about luncheon vouchers being free of tax.

Mr. Joel Barnett: Will the hon. Gentleman clarify the position of luncheon vouchers under phase 2 of the counter-inflationary policy? Is it possible for companies to give luncheon vouchers or free canteen meals in addition to the £1 plus 4 per cent.?

Mr. Jenkin: Luncheon vouchers are a form of remuneration, and increases in the value of those issued to employees should be set against any other increase allowed under phase 2.

Supplementary Benefits (Strikes)

Mr. Dixon: asked the Chancellor of the Exchequer whether he will consider legislation whereby supplementary benefits paid to strikers should be taxed.

Mr. Patrick Jenkin: I cannot anticipate my right hon. Friend's Budget Statement.

Mr. Dixon: Is my hon. Friend aware that that reply will cause dismay in Cornwall among working people who do not go on strike, not least among many of the traditional supporters of right hon. and hon. Gentlemen opposite?

Mr. Jenkin: I take note of what my hon. Friend said. As he knows, there have always been formidable administrative difficulties about taxing supplementary benefits, whether paid to strikers or not. The Government are engaged in a thoroughgoing and extensive review. I cannot say more.

Mr. Cronin: Would it not at least be an act of decency on the part of the hon. Gentleman if he made it clear that he abhors the idea of the wives and children of strikers being penalised on account of strikes?

Mr. Jenkin: I take note of what the hon. Gentleman has said.

Mr. Ridley: Does my hon. Friend agree that if there were need no tax would be payable? Is it not intolerable that safety devices are subject to tax, whereas subsidies to well-off strikers are not?

Mr. Jenkin: I think that my hon. Friend will recognise that the earlier Question related to the application of VAT as a comprehensive tax on consumer goods. The taxation of strikers' benefits raises different issues, not least administratively.

Mr. Edwin Wainwright: Will the hon. Gentleman reject entirely the suggestion made by his hon. Friend the Member for Truro (Mr. Dixon)? Why does his hon. Friend want to attack the wives and children of strikers? Why do not the Government educate industrialists and management better to understand workers, so that we can prevent strikes taking place?

Mr. Jenkin: It would be foolish of me to reject my hon. Friend's suggestion when the Government have the matter under review.

Married Women (Separate Taxation)

Mrs. Joyce Butler: asked the Chancellor of the Exchequer if he will publish a report on the number of married couples applying for separate taxation of wife's earnings in accordance with Section 23 of the Finance Act 1971 during the first year of its operation and of any difficulties which have arisen.

Mr. Nott: Approximately 3,500 elections have been made. I am not aware of any difficulties in administering these provisions.

Mrs. Butler: Is the hon. Gentleman aware that this much vaunted women's liberation measure has proved very disappointing in operation, because it continues the patriarchal practice of requiring husbands to make returns on behalf of

their wives? Will he reconsider this aspect of the matter with a view to seeking power to end this humiliating discrimination against married women?

Mr. Nott: For the great majority of working couples, in tax terms aggregation is more favourable than disaggregation, since the couple get both the married allowance and the wife's earned income allowance. I appreciate the point that the hon. Lady is making, but either a husband or wife may elect to be separately assessed if he or she wishes. There are opportunities for submitting separate tax returns in the way the hon. Lady desires.

Mortgage Repayments

Mr. David James: asked the Chancellor of the Exchequer whether he will consider exempting the capital as well as the interest component of house mortgage repayments from the burden of income tax.

Mr. Nott: No, Sir.

Mr. James: Does my hon. Friend not recognise that, owing to the inflated price of housing, any young married couple earning between £40 and £50 a week may be paying up to 50 per cent. of their gross income in mortgage repayments and tax, before they are allowed to live at all? Does he not believe that the concession which I have proposed would stimulate house ownership and thereby stimulate house building?

Mr. Nott: Income tax is a tax on income, and relief can be given only for income expenditure. Under my hon. Friend's proposal, I am afraid that the wealthy could create tax relief and make virtually unlimited profit at the expense of the Inland Revenue. My hon. Friend should look to Cmnd. 5205, which emphasises that the Government intend to bring forward proposals which will increase the availability of building land and reduce the extent to which it is possible for people to make disproportionately high profits from transactions in land. This is the way to stabilise house prices and make more houses available.

Mr. George Cunningham: Does the Minister accept that at the moment it is possible for the wealthy to make considerable profits out of loopholes in the


taxation system? Since the payment of rent is logically exactly equivalent to the payment of interest, why should there not be permission to offset rent against taxable income, in the same way as interest payments?

Mr. Nott: I am sorry, but I see no similarity between the payment of interest and the payment of rent. They are two entirely different things.

Mr. Joel Barnett: Will the Minister not point out that not only is his hon. Friend's suggestion absurd but the Chancellor's taxation policies are equally absurd, if he is to have the slightest chance of making a voluntary policy work, which is essential now that his statutory policy has so utterly failed?

Mr. Nott: We are discussing mortgage relief, which was available under the hon. Gentleman's Government. We have not changed the rules in this area at all.

Nationalised Industries (Price Restraint)

Mr. Bruce-Gardyne: asked the Chancellor of the Exchequer if he will make a further statement about the progress of his discussions with the managements of the nationalised industries regarding Exchequer compensation for their participation in price restraint; and what is now his estimate of the cost of such compensation in the current financial year.

Mr. Patrick Jenkin: I have nothing to add to the information in the Answers given on 13th December to my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)—[Vol. 848, c. 174–5]—and on 29th January to my hon. Friend the Member for Bedford (Mr. Skeet).—[Vol. 849, c. 316.]

Mr. Bruce-Gardyne: Will my hon. Friend confirm that not one nationalised industry is now running at a surplus on current operations, let alone approaching its required financial returns? What will be the impact of this on next year's borrowing requirement? Will it be over £4,000 million, over £4,500 million, or what?

Mr. Jenkin: My hon. Friend will not expect me to answer the last part of his question at this time. We have always made it clear that there are dangers in

subsidising the nationalised industries, but the dangers of inflation are even greater. It is for that reason that we have sought to ask them to restrain their prices, and they have done so—and it has been greatly in the national interest that they have done so.

Mr. Stonehouse: Does the Minister not agree that the artificial holding down of prices in publicly-owned industries amounts to a subsidy to private business? If these publicly-owned undertakings are to be able to finance the developments that they must have in the next few years is not a realistic pricing policy called for?

Mr. Jenkin: The right hon. Member is right to say that a pricing structure which allows nationalised industries to earn a reasonable return on their assets, assists them to find the finance for investment. In the interests of counter-inflationary action, however, we have asked them—and they have agreed—to restrain their prices. But their investment programmes are not held back, because they have access to lending from the National Loans Fund.

Speculative Capital Expenditure

Mr. Cronin: asked the Chancellor of the Exchequer what action he is taking to reduce the inflationary effect of speculative capital expenditure.

Mr. Patrick Jenkin: Speculative gains are as much a consequence of inflation as a cause. They are but one aspect of the manifest unfairness which inflation produces.

Mr. Cronin: Is the hon. Gentleman not aware that in spite of the freeze there has been a steady escalation of housing costs, as a result of the activities of property speculators? Is it not now completely indefensible that these speculators should be actively subsidised by being allowed to set off interest on the capital borrowed against their incomes for taxation purposes? Also, is there not now a strong case for imposing penal taxation on the profits of property speculation?

Mr. Jenkin: On the first part of the hon. Gentleman's question, I can only repeat what my hon. Friend the Minister of State said a moment ago, that the relief for interest in the case of loans to buy property is on exactly the same basis.


with no change at all, as applied when his own party was in office. On the other part of the hon. Gentleman's question, I am sure that he will recognise that I cannot say anything at this stage.

Mr. Body: Does my hon. Friend not agree that this is another example of the word "inflation" being improperly used, in that rising prices are not necessarily the same thing as inflation?

Mr. Jerkin: I recognise that one could get very deeply involved in academic arguments on this interesting subject, but I shall resist the temptation today.

Investment Income (Retired Persons)

Mr. Hiley: asked the Chancellor of the Exchequer what would be the cost of raising the surcharge starting point from £2,000 to £3,000, exclusively for married age-retired people whose income is wholly from investments, apart from that received from pensions.

Mr. Nott: Approximately £5 million for a full year.

Mr. Hiley: Does my hon. Friend not agree that savers are essential for the good economic health of the nation? Why discriminate against this small group of people by taxing them with an additional 15 per cent.? In the name of fairness, would my hon. Friend consider cancelling that surcharge—particularly as it costs so little—for what are not very high incomes today?

Mr. Nott: I remember very well our debates on this subject last year. I am afraid that I cannot comment further at this point on my hon. Friend's suggestions, but of course I agree that many people are living in retirement on low incomes from savings. It was for this reason that in last year's Budget my right hon. Friend decided that he should set a limit of £2,000.

European Economic Community

Mr. Jay: asked the Chancellor of the Exchequer what is the estimated expenditure on information from the EEC Budget in 1973.

Mr. Patrick Jenkin: About £5 million.

Mr. Jay: As British taxpayers' money is involved, will the hon. Gentleman say

how much of this is used for the payment of secret retaining fees to individuals throughout Western Europe for undisclosed services?

Mr. Jenkin: If I heard the right hon. Gentleman correctly, he was asking a very particular question, of which I must ask him to let me have notice.

Mr. Lipton: Now that we are members of the Common Market, can we not be told what part of this sum is spent in Britain?

Mr. Jenkin: The European Communities maintain an information office in London, as the hon. Gentleman is aware, and information of all sorts is available to people in this country. It is absolutely right that it should be so.

Capital Investment (EEC Countries)

Mr. Moate: asked the Chancellor of the Exchequer what exchange control restrictions now limit the free movement of capital from the United Kingdom into EEC countries.

Mr. Nott: The normal rules apply, with two significant differences. First, United Kingdom companies may transfer up to £1 million per project per year through the official exchange market to finance direct investment in EEC countries. Secondly, people moving to work in the EEC may transfer sufficient funds in official exchange to ensure their freedom to take up their employment.

Mr. Moate: Are not certain Community countries now operating even tougher restrictions on investment movement? Is it not also the case that we are committed, by the end of next year, to removing all remaining restrictions on the financing of direct investment? Can my hon. Friend say whether, if this programme in the transitional arrangements is to be adhered to, it will be done only on a reciprocal basis?

Mr. Nott: I am not aware of the particular examples that my hon. Friend is giving, but concerning the full liberalisation of direct investment, under the timetable this is something which we have to meet by 1st January 1975.

Mr. Deakins: In the event of a balance of payments crisis, would action


to reimpose controls on capital movement in the Common Market be compatible with our Common Market obligations?

Mr. Nott: There is very little purpose in my answering a hypothetical question of that nature.

Dr. Gilbert: Is it not a fact that the official limit of £1 million per project per year is widely known in the City to be virtually a dead letter now? Will the hon. Gentleman confirm that the net flow of capital, on both the direct account and portfolio account, is overwhelmingly from this country into the EEC, and not the other way around?

Mr. Nott: In the latter part of his question I think that the hon. Gentleman was suggesting that the flow was mainly coming into this country rather than vice versa.

Dr. Gilbert: No.

Mr. Nott: At present all the indications are that there is a substantial flow of money going into direct investment in the EEC. We should certainly welcome that.

£ Sterling (Value)

Mr. Skinner: asked the Chancellor of the Exchequer what, on the basis of the General Index of Retail Prices, is the purchasing power of the £ sterling now, taking it as 100p on 18th June 1970.

Mr. Kaufman: asked the Chancellor of the Exchequer what, on the basis of the General Index of Retail Prices, is the purchasing power of the £ sterling now, taking it as 100p on 18th June 1970.

Mr. Carter: asked the Chancellor of the Exchequer what has been the monthly average fall in the value of the £ sterling based on the General Index of Retail Prices since June 1970.

Mr. Nott: 81½p, or a fall of 0·6p per month. This compares with a rise in personal disposable income in the third quarter of 1972 of 1·0p per month, which gives a rise in the standard of living of the British people at almost double the rate of the period 1964–1970.

Mr. Skinner: Is the Minister aware that the counter-inflation measures, according to these figures and others,

have proved that we have a continually sinking pound, that prices are now rising faster during the freeze than before it, and that the standard of living of ordinary working people is deteriorating as a result? The last official figures show that total earnings were well below those of a month before. The Minister does not seem to be able to give any guarantee about the floating of the pound abroad, but why does he not show a little independence and fix the pound at home?

Mr. Nott: As I said in my original answer, the fact of the matter is that in the 12 months to January retail prices rose by about 7¾ per cent., whereas average earnings increased twice as fast as that. On the January figures, the retail price index for all items except food was practically stationary.

Mr. Kaufman: Is the hon. Gentleman aware that his answer provides further proof of the scandalous failure and fraud of what is foisted upon this country as an alleged prices freeze, before rate increases and before VAT? How can the hon. Gentleman expect gas workers, hospital ancillary workers and civil servants to accept wage curbs when prices are soaring?

Mr. Nott: There is little purpose in my commenting on the hospital workers. This is not a subject for me, and I do not see that it will help by discussing it across the Floor of the House.
As I said in answer to the previous question, all the evidence is that the retail price index for all items except food was practically stationary in January. The standstill is having a very good effect.

Mr. Speaker: Order. It is now 3.15 p.m. Further supplementary questions should be very brief.

Mr. Carter: Is it not obvious from the answer that wage claims at present not only have to be retrospective but also have to cater for the continuing decline in the value of the pound? On that basis is not the gas workers' claim fully justified?

Mr. Nott: I have already told the House that over the recent period the standard of living of the British people has been rising at double the rate, in real terms, that it was rising during the period


of office of the hon. Gentleman's party. I do not see why he should complain about that.

RATES

Mr. Alfred Morris: asked the Prime Minister what discussions he has now had with civic leaders from Manchester, Leeds, Sheffield, Liverpool, Birmingham and Bristol about anticipated increases in municipal rates; and if he will make a statement.

Mr. Charles R. Morris: asked the Prime Minister whether he will make a statement on the meeting which he had with civic representatives of Manchester, Leeds, Sheffield, Liverpool and Birmingham on 9th February last, to discuss their municipal budget problems.

The Prime Minister (Mr. Edward Heath): I met representatives of the six cities on 9th February and we discussed the problems which they face in fixing their budgets. We agreed that control of inflation was essential in dealing with those problems and they recognised what the Government have already done to help the cities through the rate support grant and the adjustment in the domestic element. I undertook to give careful and urgent consideration to the points which they put to me.

Mr. Alfred Morris: Why is the Prime Minister dithering? Does he recall promising the five cities an early reply about two weeks ago? He now appears to be showing no sense of urgency whatever. If he is unable to offer immediate and substantial help to cities such as Manchester, is he aware that his policies for countering inflation will be increasingly regarded by ratepayers as a carefully organised hypocrisy?

The Prime Minister: If the hon. Gentleman wants to be able to help the city of Manchester that is the worst possible way of going about it. It is exactly the reverse of the attitude adopted by the cities. I told the House, on Tuesday I think, that the cities have sent us three separate lots of memoranda putting forward their statistics, that these are being carefully examined, and that we shall announce the result of that at the earliest possible moment. We are well aware of

the urgency of this matter, because of their obligation to fix rate poundages.

Mr. Ridsdale: Does my right hon. Friend agree that it is not only the big cities which face rate increases? Is he aware that the county of Essex faces big increases on the rate charge, likely to be 24 per cent. apart from revaluation? May I press my right hon. Friend to do something urgently to bring in some reform of local government finance?

The Prime Minister: I mentioned only the cities in this answer, because the Question was about the cities. But on the following Tuesday I saw the representatives of all other local authorities in the country, including the County Councils Association. As far as the general reform of local government finance is concerned, we have only discussed this briefly and not in detail, but it is recognised that a long-term solution to many of the problems of both the cities and local authorities can be reached only in the context of the reform of local government finance.

Mr. Charles R. Morris: May I assure the Prime Minister that by taking these two Questions together he is not contributing by any means to a family conspiracy?
Will the right hon. Gentleman indicate what percentage increase in the domestic rate he would consider to be excessive? Would it be an increase beyond 5 per cent? Regarding the envisaged Government monitoring procedure of municipal rates, is it the Government's intention to recommend to local authorities that they economise on education, social services and social welfare? Will the Prime Minister give the House and the nation his thoughts on this matter?

The Prime Minister: The cities did not ask for any particular figure to be taken into account from the point of view of what would be excessive. They were trying to analyse the different reasons for the burden on the cities and they acknowledged, of course, that in some cases their own expenditure, apart from Government expenditure, had a considerable effect on it. We know that last year Manchester's rate rose 29·4 per cent., or nearly three times the national average, following the change of control on the council.

Mr. William Hamilton: Come off it.

The Prime Minister: We also know that the GLC, on the other hand, for two consecutive, years has managed to keep its demand the same.

Mr. Kinsey: My right hon. Friend is quite right to say that the cities should bear the expenditure resulting from their own decisions. Will he please look in particular at the situation in Birmingham, where the differential between industrial rating and domestic rating has got out of step because of revaluation?

The Prime Minister: Yes. There are certain problems which the cities have in common and others which are peculiar to individual cities. That was also confirmed at the meeting. The question raised by my hon. Friend the Member for Birmingham, Perry Barr (Mr. Kinsey) applies particularly to Birmingham but not, as far as I know, to any of the others present at the meeting.

Mr. Harold Wilson: Will the Prime Minister, for greater accuracy, remind the House of what he said in the 1970 election about the rate burden, in his exact words as he used them, and will he now tell us how much the rate burden has risen under his administration?

The Prime Minister: What I can tell the right hon. Gentleman is that this—[HON. MEMBERS: "Answer the question."] I am answering the question in detail. This Government have given a higher grant—60 per cent. of expenditure—[Interruption.]—more than £3,000 million, higher than ever before, and we have also given the highest increase in the domestic element. That is the contribution that this Government have made to taking the burden off the rates. [Interruption.]

Mr. Wilson: Will the right hon. Gentleman, in a total breach of precedent, answer the question I put to him?

The Prime Minister: The answer is that what local authorities spend is to a considerable extent in their judgment. If the right hon. Gentleman wants to have—[HON. MEMBERS: "Answer the question."] If he wants to have a figure [Interruption.]—a figure for the previous year, I will get it worked out for him. What I am saying, and the right hon. Gentleman knows it well, is that the

Government are making a greater contribution than ever before.

Mr. Wilson: Answer my question.

The Prime Minister: I wish the right hon. Gentleman would stop losing his temper.

Mr. Wilson: What the country is entitled to in answer to the question is not what the Prime Minister has told the House now but what he told the country in 1970. Will he answer that?

The Prime Minister: If the right hon. Gentleman wants to know he can look it up. [Interruption.]

Sir Harmar Nicholls: If we can get away from the cant put forward by the Leader of the Opposition, is it not a fact which we must face that price increases account for only a part of the rate increase, and that the only way to get rates to a proper level is to reduce expenditure? To give an extra Exchequer grant, if that means extra taxes, is not the answer, because the ratepayers are invariably the taxpayers. That fact must be faced.

The Prime Minister: I agree with my hon. Friend, and the cities were at great pains to point out the different factors which were entering into their problems. They emphasised the impact of inflation on their rate expenditure and their support for the Government's policies in dealing with inflation. At the same time, they pointed out some of the other factors I have mentioned, such as the change in population, the balance between industrial and domestic rates, and so on. These are aspects which must be dealt with separately. As for cutting back expenditure, the city of Sheffield representative said they had cut back by £3½ million and that they were therefore keeping their demands the same.

Mr. Heffer: Is not the whole point that the large cities have no wish to cut back on the welfare services but at the same time have the great problem of depopulation—of people moving to the areas outside the city boundaries—and that that is the basis of the crisis facing the cities? Will the Prime Minister give us a clear assurance that the answer will be forthcoming in the near future, in order that the cities can get down to


working out their forthcoming budgets, at the same time ensuring that the welfare services, and so forth, are maintained at their present level, if not increased, as they should be?

The Prime Minister: I can give the hon. Member an assurance that our conclusions will be announced at the earliest possible opportunity. On the question of declining population, of course there is an allowance for that in the rate support formula. What we discussed with the cities was whether in the circumstances in which Liverpool, for example, finds itself, that formula is satisfactory. The cities agree that this formula cannot be dealt with before the next rate poundage is announced. It can be tackled in the reform of local government finance.

Mr. Alfred Morris: On a point of order. In view of the unsatisfactory nature of those replies I give notice that I shall raise the matter on the Adjournment as soon as possible.

SECRETARY OF STATE FOR EMPLOYMENT

Mr. Carter: asked the Prime Minister if he will define the responsibilities of the Secretary of State for Employment.

The Prime Minister: President Bhutto is always welcome in London, but there are no current plans for him to come here.

Mr. Speaker: Order.

The Prime Minister: The responsibilities of Ministers and their Departments are defined in a number of standard works of reference including "Britain, 1973", an official handbook published by Her Majesty's Stationery Office, copies of which are available in the Library of the House.

Mr. Carter: Is it not obvious that conciliation in industrial affairs has been deleted from these responsibilities? Is it not for that reason that we have the worst strike figures for 40 years and a policy of confrontation throughout industry? Will the Prime Minister say when conciliation in industry will be restored and sanity returned to industrial affairs?

The Prime Minister: Conciliation is used a very great deal by industry through

the Department of Employment at the present time. It is one of the major responsibilities of the Secretary of State for Employment, his Department and his conciliation officers, and the whole of industry knows that it is being very widely used.

Mr. Russell Kerr: Rubbish.

Sir Gilbert Longden: Among the Secretary of State for Employment's other duties, one is to maintain employment and to arrange for retraining. Has not unemployment fallen, and has my right hon. Friend not arranged for 100,000 people to be retrained? Is it not also the case that the Leader of the Opposition last Tuesday seemed to support my right hon. Friend's suggestion that the gasmen should put their case before the Pay Board now, but that nothing should be acted upon until phase 3?

The Prime Minister: The whole House will welcome the great increase in training and retraining which is now going on. It is a steady increase. The House will also welcome the substantial further reduction in unemployment shown by the figures published today, with a fall of more than 200,000 over the last year.

Mr. Prentice: In the Prime Minister's reply to the supplementary question to my hon. Friend the Member for Birmingham, Northfield (Mr. Carter) he said that the conciliation rôle was still an important one. Will he therefore tell the House whether the Secretary of State for Employment is being inhibited by the Prime Minister personally, or by the Cabinet, in performing his traditional conciliation rôle in relation to the gas dispute, or can he go ahead and take the steps which would normally be expected of a Secretary of State for Employment in such a situation?

The Prime Minister: The right hon. Gentleman understands, I think, that there is a standstill, which was laid down by Parliament. We are now asking Parliament for powers to move into the second stage on which the guideline has been laid down, and we shall ask Parliament for approval. Therefore, within the scope of that there is room for negotiation. As I understand it, however, the Gas Corporation has already offered the maximum under the guidelines. As for conciliation on other aspects of industrial


relations, of course, my right hon. Friend's Department is at the disposal of all of industry, whether employers or unions.
As for the present situation, which is the subject of correspondence between the Leader of the Opposition and myself, my right hon. Friend is inviting the unions so that they can discuss this with him.

Mr. Harold Wilson: As the Prime Minister omitted to reply to the second part of the question asked by his hon. Friend the Member for Hertfordshire, South-West (Sir Gilbert Longden) about my Question on Tuesday, will he now tell the House, instead of waiting for television tonight, that the letter he has sent me is a flat rejection of what I proposed on Tuesday, and that he must now bear full responsibility for the industrial disruption that followed that rejection?

The Prime Minister: The letter will be published, and the House and the public will be able to judge for themselves. The right hon. Gentleman is absolutely, completely and utterly mistaken. I have said in the letter that we are setting up the Pay Board, that the nominations will he made and the men designated at the earliest possible opportunity, and that immediately they are nominated they will start work. What I have said is that for them to do the work, with the full staff, and to hear any submissions that any trade union or anyone else likes to make, it is not necessary to designate them as a Royal Commission for the next four or five weeks. They will be established, and they will carry out the task——

Mr. Wilson: When?

The Prime Minister: Immediately they are established. We shall announce the appointments as soon as they have been settled——

Mr. Wilson: When?

The Prime Minister: The way in which the right hon. Gentleman constantly loses his temper is becoming rather monotonous.
If the Pay Board were set up as a Royal Commission it could not be set up any earlier than the announcement of members' appointments. They will be appointed at the earliest possible opportunity. The unit, under a deputy chairman, that is to concentrate on dealing

with anomalies will be set up at the earliest opportunity. It will be available to hear any submissions, or any evidence—[interruption.] It will have exactly the same possibilities and opportunities as a Royal Commission——

Mr. Wilson: No.

The Prime Minister: It will, indeed. The union can make any presentation to it that it wants, as can the employers. They can put any information before it. It is a matter of four or five weeks before the actual Pay Board is established. Those members will then continue, and the work they have done will be continued with them.

Mr. Wilson: The Prime Minister says that those members will have the same powers as a Royal Commission. A Royal Commission, which the right hon. Gentleman could have recommended to the Crown in the past two days and announced today, would have had power to send for persons and papers. Until the Counter-Inflation Bill receives the assent of this House and another place, what powers will the nucleus—consisting, as far as I can see, of an establishment officer and two or three other people—have to send for persons and papers?

The Prime Minister: Any union or employer involved can go immediately—they can go at this moment—to the secretary and present the information. I see no difficulty whatever about the unit operating directly it is established. I said in my letter to the right hon. Gentleman that we were in a very great measure of agreement about the sort of consideration required, and that this would continue under stage 2, and that there would be the opportunity to deal with the anomalies under stage 3. All of these are matters on which we are agreed, and I welcome that. I have rejected nothing. I have said that the unit will immediately begin to operate.
If the right hon. Gentleman is saying that everything depends on calling the people concerned a Royal Commission, I can only say that he is completely mistaken, and that they will be able to do everything that is required—[Interruption.] Is the right hon. Gentleman aware that the General Secretary of the TUC has said in public, and repeated in the


United States, that the trade union movement does not want a confrontation, and neither do the Government—[Interruption.] The General Secretary has repeated his view that the Government do not want a confrontation. I suggest that the views of Mr. Feather should be listened to instead of the disruptive—[Interruption.] But why should not I quote the General Secretary of the TUC? He has confirmed that the Government do not want a confrontation. It seems to me that the right hon. Gentleman is just trying to pursue disruptive tactics himself.

Sir Harmar Nicholls: On a point of order, Mr. Speaker. Is it in accordance with the high standards of the House that an ex-Prime Minister—the present Leader of the Opposition—should use the Dispatch Box to give a twisted version of a letter which has not been produced?

Mr. Speaker: That is not a matter of order.

Mr. Stonehouse: On a point of order, Mr. Speaker. As the Prime Minister has already answered Question No. Q3, although inadvertently, may I please be allowed to put my supplementary question to him?

Mr. Speaker: I am afraid not.

Mr. Stonehouse: On a point of order. May I revert to the point I raised on Tuesday, Mr. Speaker, and draw your attention to the fact that out of a total of 29 Questions to the Prime Minister today only Questions Nos. Q1, Q2 and Q24 have been answered? How are back-bench Members to be allowed to pursue their Questions to the Prime Minister when we are allowed only 15 minutes or less to put them? May consideration be given to the Prime Minister's Questions coming on the Order Paper at a reasonable hour, perhaps at 3 o'clock?

Mr. Speaker: As I have said before, that is not a matter for me, but rather shorter supplementary questions and a little less noise would help.

Mr. Thorpe: Further to that point of order, Mr. Speaker. As it is a rule of the House——

Mr. Skinner: Mr. 280 per cent.!

Mr. Thorpe: The hon. Gentleman will have to ask his Front Bench about that.
As it is a rule of the House—[Interruption.]

Mr. Speaker: Order. I must ask the House to behave itself.

Mr. Skinner: Watch your pockets.

Mr. Thorpe: It sounds rather like Chester-le-Street.
As the same Question cannot be tabled twice in the Session, and as the Prime Minister has inadvertently answered the Question of the right hon. Member for Wednesbury (Mr. Stonehouse), are we to take it that the right hon. Gentleman cannot re-table the Question, which is one of considerable importance and interest?

Mr. Speaker: The right hon. Member for Wednesbury (Mr. Stonehouse) was rather fortunate to receive an answer, because it was given in error. The asking of a supplementary question is a matter for me. I shall consider the point that the right hon. Member for Devon, North (Mr. Thorpe) has just raised.

Mr. Maxwell-Hyslop: On a point of order—

Mr. Speaker: The hon. Gentleman has given me notice of his intention to raise a point of order. I shall be grateful if he will raise it at the end of Business Question time.

BUSINESS OF THE HOUSE

Mr. Harold Wilson: May I ask the Leader of the House to state the business for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. James Prior): Yes, Sir. The Business for next week will be as follows:
MONDAY 26TH FEBRUARY—Supply (10th allotted day).
There will be debates on Opposition motions on Unemployment in Scotland, until about seven o'clock, and afterwards on House and Land Prices in Scotland.
Motions on the Bacon Industry Stabilisation Scheme and on the Representation of the People Regulations.
TUESDAY 27TH FEBRUARY AND WEDNESDAY 28TH FEBRUARY—Remaining stages of the Counter-Inflation Bill.
THURSDAY 1ST MARCH—Second Reading of the Administration of Justice Bill [Lords] and of the Overseas Pensions Bill [Lords].
Motions on the Common Agricultural Policy Order and Regulations.
FRIDAY 2ND MARcH—Private Members' Bills.
MONDAY 5TH MARCH—Debate on the Consultative Document on the Price and Pay Code.

Mr. Wilson: With regard to the debate on Monday 5th March, will the right hon. Gentleman confirm the impression the House had from a speech by the Prime Minister a few weeks ago that it will be a debate in which the Government will listen to the views of the House on the consultative document, that it will not be the definitive debate on the document, and that a version amended as may be thought fit in the light of the debate will be formally submitted to the House before it comes into effect?
Secondly, with regard to the business for Tuesday and Wednesday, is not the right hon. Gentleman guilty of a slight omission? On consideration, would not he have liked to concede that, despite the strong feeling about the Counter-Inflation Bill on both sides of the House, the Committee stage made very good progress and entirely fulfilled what the Shadow Cabinet said in its statement on the day of the Lancaster House Press conference, contrary to the Prime Minister's statement, when he said that we had changed our view and were going to hold up the Bill? Will the right hon. Gentleman now concede that the Committee discussion has been very full, constructive and thorough, and that we fully implemented our pledge in the matter?

Mr. Prior: On the first point raised by the right hon. Gentleman, I confirm that this is to be a debate on the consultative document, which, of course, will enable the Government to take into account the full views of the House. We can then consider whether they should be incorporated into the draft code and whether there should be a debate on that before the amended code has to

come into operation. It is a question whether we should have another debate in between the consultative document and the consideration of the code, or whether we should have a debate on the draft code as well.
On the right hon. Gentleman's other question, I have noted what he said. I think that the House has performed extremely well in Committee to get through the Counter-Inflation Bill in the time it has taken.

Mr. Wilson: Will the right hon. Gentleman explain his answer to the first point I raised? I hope I have it right. We understood that there would be two debates—one of a consultative character, in which we would all express views on the matter, followed by a debate on the code. When the right hon. Gentleman said that after the debate the Government would have to consider a further debate, did he mean that we shall have one and not two debates or that we shall have three debates, because of the draft code?

Mr. Prior: There will certainly be two debates, and there could possibly be three. If we think that two is sufficient, we would like to stick at two.

Mr. Biffen: In order that the Report and Third Reading stages of the Counter-Inflation Bill can proceed both in an amiable and a well-informed manner, will my right hon. Friend confirm that the consultative document on the draft code will be available to hon. Members in the Vote Office on Monday? If so, at what time on Monday?

Mr. Prior: No one wants it to be an amiable occasion more than I do, so I support my hon. Friend in that hope. The consultative document will be available before we come to Report stage, but I am not certain at what time it will be available. I cannot go further than to say that I have noted what my hon. Friend said, and I note that it would be to the convenience of the House to have the document as early as possible next week. But at this stage I would not want to commit myself to the actual time.

Dr. David Owen: Will the right hon. Gentleman give an assurance that the defence debates will not take place in


the week beginning 12th March, since the Defence and External Affairs Sub-Committee of the Expenditure Committee will be in Washington that week. He will recall that he was warned of this in October.

Mr. Prior: I recognise that that is a problem. I am considering whether there is any possible way in which I can avoid holding the debates in that week, because I know that certain hon. Members from both sides of the House who are deeply interested in the subject will be away. On the other hand I am in great difficulty because of the Budget debate and the amount of business we have to get through before the spring guillotine falls. But I will bear in mind what the hon. Gentleman said.

Sir. P. Bryan: When may we expect the Bill which introduces the Manpower Commision?

Mr. Prior: Certainly not for a few days, at any rate. I hone that it will be within perhaps a fortnight or three weeks, but I would not like to be certain about it at the moment.

Mr. Raphael Tuck: Will the right hon. Gentleman arrange for the Minister for Trade and Consumer Affairs to make a statement next week about why he sent one of his underlings last Friday to the House to object to my Bill which would ban pyramid selling, and to explain whether he objects to pyramid selling, what his objection to the Bill is, and whether he wants to continue pyramid selling, and, if he does not, why he is dragging his feet and doing nothing about it?

Mr. Prior: I reject what the hon. Gentleman said. I remind him that on the previous Friday one of his hon. Friends objected to the Bill, so I do not want to hear any more about that from him. The hon. Gentleman asked whether my right hon. and learned Friend would make a statement next week on the subject. My right hon. and learned Friend is discussing it and considering it carefully and will make a statement or arrange for the House to be informed at the earliest possible opportunity.

Mr. Michael Hamilton: Will my right hon. Friend find time next week for the House to debate the Report of the Select

Committee on the Parliamentary Commissioner concerning my constituents? As he knows, the Committee, without my knowledge, heard evidence from senior civil servants and published it and has since declined to hear evidence from me. If he is not able to find time next week, perhaps he can find time to persuade all Select Committees to grant comparable facilities to hon. Members as are granted to senior civil servants, because otherwise it makes it difficult for all of us adequately to represent our constituents here.

Mr. Prior: I know the case very well. We discussed it in the debate on the Reports of the Select Committee on Procedure just be4fore Christmas. I am afraid that I cannot see a further opportunity of debating what is for my hon. Friend a very difficult subject but which for the House as a whole involves us in very considerable issues of principle, of which my hon. Friend and other hon. Members are well aware.

Mr. Faulds: When may we expect a statement from the Foreign Secretary about what representations he is making following the attack on Lebanon by Israeli forces and the shooting down of a civil airliner by the Israeli Air Force? Will the right hon. Gentleman stress to the Foreign Secretary that it is absolutely essential that the British Government should not be party to the double standards of judgment applied too often to the actions of the Israeli Government?

Mr. Prior: My right hon. Friend the Foreign Secretary has made the Government's position clear. We deplore this action but there is nothing further to add at this stage.

Mr. Fowler: May I draw my right hon. Friend's attention to the great public concern about the increase in crimes of violence in the country, in particular those involving the use of fire arms, whether they be real or imitation? In view of the urgency of the situation, will he undertake to make time available so that the matter may be debated?

Mr. Prior: I recognise that this is a very important subject and I will convey my hon. Friend's views to my right hon. Friend the Home Secretary. But I must tell my hon. Friend that over the next few weeks our time is very fully allocated and that it will not be easy to


find time for general debates of that nature.

Mr. Marks: Is the right hon. Gentleman aware that there is considerable concern about the delay in legislating on the reorganisation of the employment service and also of local government finance, which affects it? Are we to have a statement or a presentation of these Bills next week or not at all in this Session?

Mr. Prior: As I told my hon. Friend the Member for Howden (Sir P. Bryan), I expect the Bill on the Manpower Commission before very long. I have nothing to say at this stage about local government finance.

Mr. McMaster: In view of the profound importance of the White Paper on Northern Ireland, the fact that Stormont is not in session to debate the proposals, and the continuing murderous attacks by the IRA on civilians and members of the security forces, three members of which have been killed in the past week, will my right hon. Friend arrange a debate following the plebiscite and before the publication of the White Paper?

Mr. Prior: No, Sir. I think that we should have the White Paper as soon as possible, and after that, of course, there will have to be a debate. I believe that a debate after the White Paper would be more profitable for the House as a whole than a debate before it.

Mr. Dalyell: In the light of discussions through the usual channels and of correspondence, does the right hon. Gentleman see any hope of the Second Reading, perhaps taken upstairs, of the small agreed measure on penalties for pollution of the North Sea?

Mr. Prior: I know the hon. Gentleman's interest in the subject and I share it fully. I would like to get the matter before the House as soon as possible. But I am afraid that I still cannot say whether we can manage legislation on the subject this Session. I begin to believe that it is unlikely.

Mr. Body: Will my right hon. Friend say a word more about the business for late on Thursday night? Will he give an assurance that it does not concern any draft regulation relating to the revised currency rates and their effect upon the

common agricultural policy, particularly farm gate prices here?

Mr. Prior: No, these are not draft regulations in another form. My hon. Friend will find that they are to do much more with what we need to do for ourselves and have no real connection with anything which is in draft in Brussels.

Mr. Rose: Will the Leader of the House say when the Government will get their priorities right and allow time for a full debate on the Robens Report on health and safety in industry? Is it the Government's intention merely to rest content with the report or to lay proposals for legislation before the House to improve health and safety in that area?

Mr. Prior: The Government will certainly be laying proposals before the House in due course which will go a long way to meet the hon. Gentleman's point of view. I cannot promise an early debate.

Mr. Ridsdale: In view of the urgency of many problems concerning rating, will my right hon. Friend say whether it is the Government's intention to publish a White Paper soon? Is he aware that many of us hope that at least we shall not run away from the reform of local government finance in this Session?

Mr. Prior: It is not the Government's intention at the moment to publish a White Paper on that subject, but I hope that my hon. Friend will not have long to wait before he has another source of information.

Mr. Scott-Hopkins: Would my right hon. Friend agree that some time in March we shall have the annual price review announcement in this country, followed in the first week of April probably by that of the EEC? Does he not agree that a debate before we rise for the Easter Recess would not only be necessary but right?

Mr. Prior: I will consider what my hon. Friend says. We often have agricultural debates in Opposition time. The Government are getting short of time between now and April but I hope that the House will find the opportunity to debate agriculture.

Mr. William Hamilton: Will the right hon. Gentleman say when the Government are to table the motion setting up


the Select Committee on the Anti-Discrimination Bill in view of the promise made by the Solicitor-General last Wednesday that it would be set up in a day or two?

Mr. Prior: I very much hope that it will be set up today or tomorrow—very quickly indeed.

Mr. Stanbrook: Will my right hon. Friend arrange for the Home Secretary to make an early statement on his reported agreement to admit stateless Ugandan Asians now in Europe into this country, something which would be deplored by many of us?

Mr. Prior: My right hon. Friend has answered a Question on this today. I hope that my hon. Friend will find time to read it.

Mr. Edward Short: Will the right hon. Gentleman say when we may expect a statement on the teachers' strike, which is now widespread and which will disrupt the education of many thousands of London children?

Mr. Prior: I will convey the right hon. Gentleman's views to my right hon. Friend. I have had no indication about her making a statement of that kind.

Mr. Shersby: Will my right hon. Friend say when we shall debate the proposals for the new parliamentary building?

Mt. Prior: I shall not be able to find Government time for this over the next few weeks. I hope that perhaps hon. Members will be able to find time. I am hopeful that an occasion may arise before long.

Mr. Cormack: On a point of order, Mr. Speaker. May I point out that I intend to choose this subject for a motion which I shall move on 9th March.

MANUAL OF PROCEDURE

Mr. Maxwell-Hyslop: On a point of order, Mr. Speaker. I am grateful to you for the opportunity of raising this point of order, of which I gave you notice. Eight and a half years ago your distinguished predecessor laid on the Table of the House for the use of Members the 10th edition of the Manual of Procedure in the Public Business. I have asked that this should be reprinted in an up-to-date 1lth edition. The official

response is that as hon. Members do not show any great demand for it there is no purpose in doing this.
But the public do not show any great demand for 1964 maintenance manuals for many things because they are no longer applicable. The fact that hon. Members no longer demand the 1964 edition is evidence that it is useless. It is not evidence that there would not be demand for it if it were brought up-to-date and made useful.
The second reason why hon. Members probably do not often ask for it from the Vote Office is that they were sent a copy of it anyway when they were elected. Many hon. Members have a copy that was sent to them. I believe that more recently Members have not been sent a copy because the Clerk's Department has realised that the document is useless through obsolescence so that there is no longer any point in sending it. It is the only guide to procedure that Members are entitled to receive in the House and I press you very strongly to reconsider your decision not to order that an 11th edition should be produced for the use and convenience of Members. This is an urgent requirement.

Mr. Speaker: I am grateful to the hon. Member for giving me notice that he would seek to raise this point. I will of course consider what he said. I do not think that I made an absolute refusal. I said that I would want to be satisfied that there was some demand for the manual because a great deal of time is involved in bringing it up to date as well as a certain amount of public money. I will be guided by the views of the House, which I will seek to ascertain.

PRIVATE NOTICE QUESTIONS

Mr. Crouch: On a point of order, Mr. Speaker. I seek your guidance upon a limitation which appears to fall on hon. Members who seek to raise Private Notice Questions. As you will know, I sought to raise such a Question on the subject of the deteriorating——

Mr. Speaker: Order. It is an established rule that an hon. Member is not permitted to refer to a Private Notice Question that has not been allowed. It is one of the conventions of the House.

INTERNATIONAL MONETARY SITUATION

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Pym.]

3.56 p.m.

The Chancellor of the Exchequer (Mr. Anthony Barber): I am pleased that it has been found possible to arrange a debate on the international monetary situation so soon after the events of 10 days or so ago. On two occasions I then reported to the House, but obviously it is much more satisfactory to set out the developments at greater length, and this debate gives me the opportunity.
It would probably be for the convenience of the House if I began with a short account of the events leading up to the recent crisis and of the negotiations that took place to find a generally acceptable solution to it. I will then go on to say something of the consequences for the United Kingdom economy and for the development of the EEC, and finally, in view of the two important meetings next month, one in Europe and one in Washington, dealing with the reform of the international monetary system, I think that hon. and right hon. Gentlemen would wish to hear something from me about progress on that front, in particular whether it has been affected in any way by the recent difficulties.
The first point I want to make is that it would be quite wrong to point to any single action as being the cause of the recent disturbances, because those disturbances reflect a complex of underlying factors. The pressures in the foreign exchange markets began to build up after the decisions of the Italian authorities to introduce on 22nd January a two-tier market separating commercial from financial transactions, and of the Swiss authorities on the following day to allow the Swiss franc to float until, as they said at the time,
the situation had become a little quieter.
Looking back I believe that those moves fostered doubts in the market about the viability of the exchange rates structure which had formed the basis of the agreement we reached at the Smithsonian Institute in Washington in December 1971. Then, as the House will re-

member, there was the publication of figure of six billion dollars for the United States trade deficit in 1972. That added fuel to an already somewhat combustible situation. In the first few days of February the dollar required heavy support in Europe and in Japan. The deutsche-mark particularly was in strong demand and the German authorities tightened their controls on inward investment in Germany and on foreign borrowing by their residents.
Those measures and the continued willingness of the central banks to support the dollar caused a momentary lull, but, as we now know, this proved to be only the quiet before the storm. The Bundesbank had to buy in a massive amount of dollars in the week ending 9th February. Once again, the scale of movements of short-term funds proved bigger in this crisis than in the one before. This time, between 23rd January, when the Swiss franc was allowed to float, and 9th February, the dollar was given support totalling in all 8½ billion dollars, most of this in Germany but to a large extent also in Japan.
It is of course very difficult—I think one might say almost impossible—to determine the source of the funds being transferred from one country to another when such vast amounts are moved in a few days. In any case, I think one must recognise that it is only common prudence for those responsible for large funds to seek to use all legitimate means to safeguard the value of the assets in their trust. We ourselves had experience in June last year of the vast sums which can be mobilised in times of uncertainty.
Nevertheless, if international trade is to develop as we wish in the interests of prosperity and if the financial resources of the international community are to be available to the countries where they can be used most efficiently, then our energies should be concentrated not primarily on a search for greater restrictions but in an effort to create a world monetary system in which the scale and the damaging effect of short-term capital flows can be minimised.

Mr. Tam Dalyell: Why was it difficult to make this identification? Was it perhaps partly the result of actions of very big multinational companies, information about which is not available to national Governments?

Mr. Barber: I think there is no doubt at all that the large multinational companies play a major part in this, but it is also only realistic and right to recognise, as I said a few moments ago, that those responsible for large funds naturally use all legitimate means available to them to safeguard the value of the assets in their trust. I think it right to recognise that, but I agree with the hon. Member. I think he is right in saying that the funds of many large multinational companies play a significant part in this.
So much for a brief chronicle of the events up to Friday, 9th February. What, in fact, was at issue? In the last days of that week the international community was confronted with problems in world monetary relationships comparable in scale with those of 1971, which, the House will recall, took four months to resolve, and comparable also in momentum with those of the five days last June which precipitated the decision to float the pound.
Essentially, the situation confronting us had two ingredients. First there was the persistent weakness of the United States dollar, and secondly, there was the large and continuing surplus in the Japanese balance of payments. That surplus was the counterpart of much of the huge United States current account deficit in 1972 to which I have referred.
The difficulties to which those two factors gave rise developed with remarkable speed and on an unprecedented scale. But it is also noteworthy that there has been no precedent for the speed of the co-operative effort with which new arrangements for the main currencies concerned were achieved. The House will recall that a solution was found to this critical situation at the cost of only one full day's interruption of international transactions. The foreign exchange markets were closed on Monday, 12th February, but within only a day or two most of them were able to open again for business.
Naturally, this speedy action meant an intensive programme of international negotiations. I think the pattern of negotiations which took place is now fairly well known. Monsieur Giscard d'Estaing, the French Finance Minister, Herr Schmidt, the German Finance Minister, and I met in Paris on the even-

ing of 9th February. That meeting took place at the request of Herr Schmidt. We met together to consider whether, in the absence of action by countries outside the EEC, it would be possible to establish agreement, before the exchange markets opened again, on effective measures on an EEC basis such as an extension of the two-tier system or the initiation of a joint EEC float.
It is important to remember that at that stage we did not know whether the United States had some specific proposals to make, although it was, of course, known that Mr. Paul Volcker, United States Under-Secretary of Monetary Affairs, had just arrived in Bonn from Tokyo. He saw Herr Schmidt in Bonn on 10th February and then came to London that same evening. That evening he discussed a number of possible courses of action with me in the greatest confidence, including a proposition which was very close to that which was in fact subsequently adopted.
The following morning Mr. Volcker went on to Paris and to Rome and he returned to Paris that evening, 11th February. On that evening I went to a second meeting in Paris, at which Signor Malagodi, the Italian Finance Minister, was present, as well as Monsieur Giscard d'Estaing and also Herr Schmidt. At the end of the evening we invited Mr. Volcker to join us, and after further discussion he told us that he would be reporting to the President on the results of the conversations he had had.
As a result of this series of consultations, we were able to reach an agreed view on the most appropriate action. I only regret that because of the extreme urgency of the matter and also the practical difficulties, which I think will be self-evident to hon. and right hon. Gentlemen, the consultation had to be limited. But it should be remembered that in 1971, when we were also faced with a dollar crisis, following the American measures of 15th August of that year, the series of major international meetings did not reach a solution until December and the exchange markets were substantially upset for the whole of that period from August to December.

Mr. Denis Healey: I strongly support the point which the right


hon. Gentleman has just made, but would he agree that this indicates that the way in which the European Community theoretically plans to handle this sort of crisis is quite inappropriate to the nature and scale of the problem?

Mr. Barber: On this occasion there were very considerable practical difficulties in the consultations. I am sure the right hon. Gentleman will understand that I have given only an outline of the meetings which took place, but I think it also right to say that I had a fair number of telephone conversations both within Europe and across the Atlantic. I agree with him that if we can evolve a better method of consultation within the very short time-scale necessary when these events blow up in this way, that certainly would be highly desirable. I certainly do not dispute that.
There were a number of possible courses of action, and it may be helpful for me to discuss some of them. First, there was the possibility—at least in theory—of a unilateral floating of the deutschemark, but the Federal German Government made it clear, notably at the meeting of ambassadors which they summoned to Bonn on 6th February, that they were averse from that course, and it was not seriously considered in our discussions. It is important to remember that although market pressures concentrated on the deutschemark, the German balance of payments was not in disequilibrium. Moreover, a deutschemark float would have done nothing to solve the problem of the yen.
Next, as I told the House on 13th February when I reported, the device of the two-tier markets was also discussed. But, while two-tier markets may in some circumstances have a role to play in damping capital flows, they are ineffective against various other types of problems deriving from the balance of payments. Two-tier markets cannot eliminate imbalances on current account, and they are powerless against leads and lags. I believe that the Germans took the view that a two-tier market would not deal with the strain to which the German authorities were being subjected and, in any event, it would be administratively difficult for them to set up, at any rate in a hurry.
Thirdly, there was discussion of the possibility of a joint EEC float either for all the members of the EEC or for the majority. But it soon became clear that this was not likely to be acceptable unless all nine member countries of the EEC joined in. The idea of this arrangement, if it could be successfully initiated and maintained, is that it would preserve the foreign exchange rates within the EEC, although the group as a whole would have a varying relationship with the dollar and with other rates fixed to the dollar or floating independently. Since overall imbalances with the dollar would be cleared in the market, it would remove the intolerable pressures which had come on individual EEC countries.
It was soon apparent to us that it would not be practicable either to resolve all the considerable technical difficulties involved in setting up a common float or to assess its probable effects on the exchange markets in the very short time available to us over the weekend. In this context it was relevant that a common EEC float would have done nothing to deal with the problem of the yen or of the United States-Japanese trade imbalance that seemed to be the fundamental causes of the immediate upheaval.
Although the Government, as I have said on many occasions, intend to return to a fixed parity for sterling as soon as conditions permit, I did not consider that the circumstances were appropriate for the United Kingdom to refix the parity in order to take part in a Community float. But the full potential of the European Community will not be developed until conditions can be created in which there is exchange rate stability within the EEC. It could be that, in certain circumstances, the most appropriate way to produce this would be some kind of collective float, and for this reason there will now be a substantial study of the large technical and economic issues which are involved.
Fourthly, there was the course of action which in the event provided the solution. It was the initiative of the United States to bring about a substantial devaluation of the dollar which offered the best course and, accompanied by appropriate Japanese action, this went direct to the roots of the problems with which we were faced.

Mr. Robert Sheldon: When he comes to deal with the revaluation upwards of the yen, will the Chancellor say whether any undertaking was given by the Japanese Government not to interfere with its rate—that it would be a fairly clean float? That does not seem to have happened.

Mr. Barber: It must be for other Governments to speak for themselves. It would not be right for me to attempt to speak on behalf of any other Government.
As I told the House last week, and I repeat today, the United States authorities made a very bold move, and the other countries concerned have responded and have been willing to co-operate in making the dollar devaluation effective. The United States, and particularly Mr. George Shultz, the United States Secretary to the Treasury, deserve great credit for the speed and resolution with which they reached their decisions.

Mr. Peter Tapsell: Before my right hon. Friend leaves that section of his speech in which he has so clearly covered the possible alternatives which had to be studied, did I understand him to say that the EEC countries will study the technical possibilities of a combined float? Does this mean that the whole financing of the common agricultural policy is coming under re-examination?

Mr. Barber: What I said was that there would now be a substantial study of the technical and economic issues involved. They are very considerable, and in any event in the short time available I do not think that it was "on" on this occasion. But it is right that we should look into this to see what are the possibilities, because it may well be that in certain circumstances some kind of collective float might be the most appropriate way of achieving the exchange rate stability within the EEC which is obviously so desirable.

Mr. Healey: The right hon. Gentleman will be aware of the remarks of Herr Schmidt in Bonn about his attitude towards this matter which I confess—and I think the House will agree—were a little ambiguous. The House would like to be clear whether the Chancellor has committed himself in principle in favour of the combined float or has simply

agreed to study the implications of a combined float so that he can decide at a later stage whether in principle or in practice it is a good thing.

Mr. Barber: There was a great deal of discussion over many hours. The two salient points are, first, that I did not consider that the circumstances were appropriate for the United Kingdom to refix the parity in order to take part in a Community float, and, secondly, that I was very keen that in the light of all our discussions there should be this substantial study.
I was dealing with the approach of the United States and I have paid my tribute to Mr. Shultz. I have no doubt that this was the right approach to a solution. I well remember—and many hon. and right hon. Members will recall—that in a similar situation in 1971 after the United States President had announced the various measures on 15th August, almost everyone all round the world was urging the United States to take action to devalue the dollar. On this occasion it was done, and it was done swiftly and decisively, in contrast to the long period of discussion and negotiation which preceded the Smithsonian settlement.
I shall say more in a moment about recent events and the need for a greater effort to bring about reform of the international monetary system. The fact that an effective dollar devaluation has been achieved, on the initiative of the United States, means that we have in practice already moved some way towards the greater symmetry in the adjustment process which is one of our main objectives for the reform of the international monetary system.
I turn now to the consequences of the dollar devaluation and the related arrangements for the United Kingdom. I will make two general points. First, changes in parities or in effective exchange rates do not and cannot be expected to have instant results. Secondly, the initial effect of an exchange rate change will be perverse. By this I mean that the deficits of the devaluing countries and the surpluses of the revaluing countries will each tend to increase for some time. Eventually, of course, the real effects on the distribution of trade come through and help to remove imbalances. But the process takes time and should be


recognised to do so, so that trade and other signals in the so-called J-curve period are not misinterpreted.
Turning more specifically to the immediate effect of the momentous changes we have seen, it remains true that the foreign exchange markets have not yet settled down. A new and stable pattern of exchange rates still has to emerge. But the main effects of the changes will be to cause the United States market and some other markets which have stayed with the dollar to become rather more difficult for European goods. The Japanese market, on the other hand, should become relatively easier.
What I must make clear is that if we compare the current position with the situation immediately before the exchange rate alterations, the effective sterling exchange rate has changed very little. By "effective exchange rate" I mean the rate relative to those of all other currencies, taking account of their importance in our trading relations.
Sterling has strengthened against the dollar by about 3 per cent. but it has fallen against the combined EEC currencies by 4 per cent. and by significantly more against the Japanese yen. Overall, there should be little or no impact on the total of our trade or on the cost of our imports. We may lose in some markets but gain in others, and taken together these effects should broadly balance out.
It is right that I should refer specifically to the effect on domestic food prices. First, I can reassure the House about food prices covered by the common agricultural food policy. As my right hon. Friend the Minister of Agriculture announced in his statement to the House yesterday, we have agreed with our Community partners on special arrangements which will protect prices in this country from the effects of movements in the exchange rate. The new arrangements which my right hon. Friend announced will mean that even though the pound is now at a slightly lower level in terms of the unit of account in which agricultural prices of commodities covered by the CAP are expressed in the Community, this will not now cause any increase in the prices of these commodities in this country.
As the House knows, our policies in the standstill have been directed at restricting those domestic prices which are within our control—and as far as world food prices are concerned, the Government, like the previous Administration, have never pretended that it was possible to isolate the United Kingdom consumer from the effects of world food prices. But I do not expect the currency changes in themselves to have a significant effect on the price level of our imported foods. This follows partly from the special arrangements under the common agricultural policy which we have negotiated with our EEC partners, and partly from the fact, as I said earlier, that the effective sterling exchange rate is very little chanced.
I must make one further comment about the effect of the sterling exchange rate on food prices. In the present circumstances there is nothing more likely to affect confidence in sterling, sending the rate down and so raising the cost of imported food, than industrial action of one kind or another, and it follows that to maintain confidence in sterling and so keep down the cost of imported food there is no greater service that the Opposition could render the nation than to back the Government in the fight against inflation—and may I just add that in a debate on the international monetary situation I feel that that is the least we are entitled to expect.

Mr. Healey: The Chancellor of the Exchequer will not be surprised if I follow this element of what he has been saying in my contribution later if I catch your eye, Mr. Speaker. But would he clear up a contradiction between what he has just told the House and what his right hon. Friend the Minister of Agriculture told the House yesterday afternoon? The Chancellor has just told us that the effective devaluation against the European currencies is about 4 per cent., but the Minister of Agriculture said yesterday,
What has happened now is a reduction which will approximate somewhere between 5 per cent. and 6 per cent., as a further depreciation of the pound in relation to European currencies …".—[OFFICIAL REPORT, 21st February 1973; Vol. 851, c. 477.]
I hope the Chancellor will clear this up because he will be well aware that in relation to inflation and the balance of payments it is a major matter.

Mr. Barber: I have not the passage immediately to hand but I will look into it. If there is anything to clear up, it will be done by my hon. Friend in replying to the debate. But, subject to checking any incorrection, I believe the latest position to be that sterling has fallen against the combined EEC currencies by some 4 per cent. I will look into the point the right hon. Gentleman raised. The important point for the EEC, I believe, is that with regard to those commodities which are covered by CAP, as the result of the arrangements made by my right hon. Friend the Minister for Agriculture, the slightly lower level of the point will not cause any increase in the price of these commodities in this country.

Mr. Tom King: May I endorse what my right hon. Friend has said, particularly on the subject of the strength of the British currency? One of our main buying competitors in world food markets is Japan, which is increasingly becoming a competitor for the foods we like to buy, and the strength of its currency is making Japan increasingly a more attractive market, so that the strength of our currency is absolutely vital to the hand of our negotiators whose job it is to purchase food abroad. This is a factor which many companies are feeling at the present time.

Mr. Barber: I believe that that is a very important point. It follows from the change in the value of the yen relative to sterling and has the consequences to which my hon. Friend referred.
I want to turn to the consequences of recent events for the European Economic Community and for progress towards economic monetary union within the Community, a point raised a few minutes ago. The situation following the decisions of the United States and of Japan was discussed at length in the Council of Finance Ministers of the EEC countries which I attended in Brussels last week. It is fair to say that the general conclusion which emerged from that meeting was that the decisions of the United States and Japanese were a positive, and therefore a welcome, move towards restoring equilibrium in international payments.
Those decisions certainly imply no setback in Europe's determination to proceed to greater integration, and world-

wide equilibrium will be fostered and helped by the development of a strong European entity. We are going ahead with the European Monetary Co-operation Fund and are also studying closely together our common position on world monetary reform, the importance of which, I believe the whole House will agree, recent events have emphasised yet again.
At the International Monetary Fund meeting in 1971 I put forward on behalf of the Government proposals for reform of the system. These were built round the proposition, which I elaborated in some detail at that meeting, that a neutral reserve asset, the SDR, should in the main replace reserve holdings of national currencies. This seemed to me to be a necessary condition for the effective control of world liquidity and a system of general convertibility of currencies. I went on to point to the need for improvement in the adjustment process, and to the problem of capital movements—to which I referred again at the International Monetary Fund meeting last year. Those proposals were well received. Certainly, a number of us felt that the situation at that time provided the incentive to move forward to a strengthening of the system and, feeling as we did, I must admit to some disappointment that the progress made in following up those proposals was so slow. However, at meetings last summer under my chairmanship, first of 10 European nations and then of 30 Commonwealth Finance Ministers, agreement was reached on the basic objectives of reform, and at the Fund meeting itself last September we had a particularly helpful speech from the Secretary of the U.S. Treasury which showed that there is a great deal of common ground between us—and by "between us" I mean between a great many of those who spoke at that IMF meeting.
It was at that same meeting that a Committee of Twenty was set up to advise and report on all aspects of reform of the international monetary system. That committee includes the widest possible representation of world opinion consistent with a manageable number. Mr. Jeremy Morse, one of the executive directors of the Bank of England, was invited to be chairman of the Committee of Deputies which is, of course, a full-time job. A detailed programme of work was


prepared by the committee in the immediately following weeks and the deputies have been working through this programme in a series of three-day discussions.
The discussions so far have been primarily directed to the balance-of-payments adjustment process and the exchange rate mechanism in a reformed system, together with the whole complex of questions falling under the heading of reserve assets and convertibility to which I have referred. Discussion is now required on the possible link between the allocation of SDRs and the financing of economic development—the so-called SDR-aid link—and certain aspects of the problem of capital movements.
These are complex questions and it would be wrong to pretend otherwise. They raise issues of a highly technical and a highly political character. The several elements of reform inter-relate in a number of important respects. The discussions have nevertheless so far been constructive and co-operative. A number of countries—for example, the United States and EEC members, including ourselves—have put forward detailed proposals in particular areas, as a focus for consideration.

Mr. Dalyell: If the Morse Committee is important in the long term, as it undoubtedly is, then in the more medium term has any assessment been made of the possible ending next month of the interest equalisation tax on portfolio capital and what that would mean to the relations between Europe and the United States?

Mr. Barber: My hon. Friend the Minister of State will be referring to that matter in his reply. Progress has already been made among deputies in the Committee of Twenty. I refer, for example, to clarifying the potential role of SDRs in relation to excessive reserve assets, and possible approaches, including the use of objective indicators, towards improving the working of the adjustment process. This technical work is essential if we are to identify clearly the main issues of principle arising across the whole field.
Within the nine countries of the EEC, we shall be reviewing all these matters at the Finance Ministers' two-day meeting

towards the end of March, from which we shall go on to Washington for the meeting of the Committee of Twenty. Our objective at that meeting, and in meetings to come in the weeks thereafter, will be to reach agreement on the main decisions of principle which will enable us to put forward a comprehensive plan for reform at the Fund meeting in Nairobi in September.
I said at the outset that it is a good thing that we have had this opportunity to debate these important matters only 10 days or so from the great difficulties into which the international financial community was thrown. I should like to express my warm thanks to the Opposition for having made this debate possible.
There is no doubt that, while it is right and proper that when a Chancellor of the Exchequer returns from important meetings at which there have been far-reaching decisions with consequences for this country, and indeed for many others, he should report to the House of Commons, it is not possible to do justice to the situation in those reports merely by Question and Answer. Therefore, this debate has given me the opportunity of expanding on the situation a little more today.
It is important to recognise that these are by no means arid, academic questions. The decisions which we shall reach will vitally affect our economic policies I have talked about all the various aspects of the reform of the international monetary system. Whatever decisions we reach in Washington in those discussions of reform and thereafter will vitally affect our economic policies and the prosperity of all our people. The events of last week do not represent a setback in the work of reforming the international monetary system. On the contrary, they make reform all the more necessary and urgent. That is the task ahead.

4.35 p.m.

Mr. Denis Healey: I should like first to thank the Chancellor of the Exchequer for a comprehensivce narrative of the events that led to the resolution of last week's crisis. He clarified one or two points on which we have been unclear.
There is one point I should like to put to him—and if he does not wish to


answer it now, perhaps his hon. Friend will deal with it later. He said that one of the possible solutions discussed by the European Ministers with Mr. Volcker was the devaluation of the dollar. Was it anticipated during those discussions that the size of the devaluation would be as large as it has proved to be? The German Government can by no means be regarded now has having an over-valued currency, or of having had an undervalued currency a fortnight ago, and was the right hon. Gentleman aware of the likely size of the American devaluation?

Mr. Barber: It is as well that I should answer, because I was the one who was at that meeting when Mr. Volcker came to London. Perhaps the best way I can answer the right hon. Gentleman, without disclosing any confidences, is to say that at that meeting we discussed a number of possible courses of action, including one proposition which we discussed and which was very close to that which was eventually adopted.

Mr. Healey: I must be satisfied with that reply.
Although I was grateful for the comprehensive narrative provided by the right hon. Gentleman, I regret to say that he showed himself to be a little too complacent about the general outcome of the crisis and some of its implications. What is clear from what he said is that the United States got out of this crisis everything that it tried to get in the crisis 18 months ago and failed to obtain at the Smithsonian talks.
It must be said that the international speculators made a very big killing, amounting to about 600 million dollars out of the German Government alone. Every time international speculators make a killing out of speculation on the possibility of currency changes, the probability is that they will seek to do so increasingly in future.
The Chancellor gave no indication that there had been any serious discussion of how to prevent this type of speculation occurring in the future. We are well aware that there is now around 100,000 million dollars-worth of Euro currency footloose and available for speculation of this type. The dollar component of that currency, on the best estimate I have seen, is about 70,000 million. So long as

this is allowed to move at will, with the expectation of making a profit out of the change in currency parities which the movement itself may bring about, the international situation will remain vulnerable to the sort of crisis of the last few months, and the crisis to which the pound found itself so vulnerable last summer.
The second point that emerges from the right hon. Gentleman's narrative, though he was unwilling to identify it clearly, was that the European Community as a body failed completely to operate as its Governments had intended. Many of the promises made by European Prime Ministers as recently as October at the Summit Conference were not carried out. The Chancellor will be well aware that this point has been made by members of the Commission and by representatives of some of the countries not directly concerned in the discussions to which he has referred.
For most of us in this House the one agreed conclusion, although I am not sure that it is unanimously agreed, is that the reason Britain was not in the centre of the storm in the last few weeks was simply that the pound is floating. The advantages of floating have proved to be very real. It is essential that this country should be capable of enjoying these advantages, because we are particularly vulnerable to speculation—partly because we still operate 3 reserve currency and are a major international banking centre, but even more because of the disturbing trend of our balance of payments over the last year, involving a switch of £1,000 million in balance of payments over a year, and the fact that in the current year most observers expect us to have a deficit on balance of payments of between £500 million and £1,000 million. The figures over the last three months show an annual rate of deficit on balance of payments of £400 million.

Mr. Nicholas Ridley: Does not the right hon. Gentleman mean the balance on current account? There cannot he a balance of payments while the pound floats.

Mr. Healey: I do mean the balance on current account. Indeed, these were the figures which led to a great deal of the decline in the value of sterling over the last few months. I shall come to that in a moment. The point I have just made.


was made to the Chancellor by the Confederation of British Industry in its memorandum last November on the whole question of the floating of the currency and the pegging of the pound.
What the Chancellor failed to discuss in what he said was the importance of making it clear to British industry that he has no intention whatever of giving the pound a fixed parity until certain well-understood conditions have been fulfilled. He must know that the confidence of British industry in the prospect of continued growth is linked very directly indeed to its confidence that the Chancellor will continue to be guided by that famous sentence which he uttered in the Budget debate last year to the effect that he would not sacrifice growth to the maintenance of an unreal parity.
It seems to me that there would be general agreement on both sides of the House that there are three conditions which must be met before there can be any question of giving the pound a fixed parity again. We shall have to be able to satisfy the world, first, that we shall achieve a long-term equilibrium in our balance of payments; second, that inflation in Britain is, broadly, at least as well-controlled as it is in most of our trading partners; and, finally—and I shall return to this at the end of my remarks—that we have agreed some international machinery for the protection of parities against the type of speculative attack from which various currencies have suffered over the last two years.
Although I well understand the motives for the way the Chancellor has spoken, I cannot help feeling that it is dangerous to his basic responsibilities for the British economy that he should speak so often in ambiguous words, and indeed it appears sometimes in two voices. Whatever the reason, there is no doubt whatever that President Pompidou had the impression last September that there was a very good chance, indeed almost a commitment by the British Government, that the pound would be pegged before January, and in the Press conference which he gave just after January the bitterness with which he spoke about our failure to give the pound a fixed parity indicated again that he felt that he had been disappointed in an under-

standing. I well appreciate that sometimes, even between the greatest statesmen, misunderstandings can arise, but I think that the sort of words that the Chancellor so often uses in referring to his intention to return to a fixed parity make this type of misunderstanding more likely.

Mr. J. Bruce-Gardyne: Although I know that the contradiction between a return to a fixed parity and the pursuit of growth is part of conventional wisdom, is there not an underlying contradiction in this argument, because presumably the reason for which a return to a fixed parity would interfere with growth is that balance of payments restraints would be caused because of the pressure on the currency to go down? If, on the other hand, the currency is floating, it will presumably be floating downwards in such circumstances. But this would add to the pressures of domestic inflation, which would also presumably be an inhibition on domestic growth.

Mr. Healey: I do not think there is a contradiction and I shall address myself later on precisely to that point because it is of major importance—the contradiction between the sinking value of the pound in international terms and the maintenance of stable prices in the United Kingdom.
All I would say in defence of the Chancellor here is that if he had wanted to come down to the sort of fixed parity which he could have had some confidence of holding last June, there was no chance that the other members of the international monetary community would allow him to do so. Some of them would have gone down with him. It was only because he chose to float gently down that he was able to get as far down as he wanted, and only because he was capable of sinking in response to market pressures last week that the pound emerged comparatively unscathed from the monetary crisis which we are discussing. I think the hon. Member would agree with that.
If we could get international agreement to peg the pound at what we and the world monetary community regarded as a realistic parity for the long term, this would be better. But the question is,


first, whether the international community would agree with us on what that parity should be and, secondly, whether the Chancellor, as a politician, could get away politically with the sort of parity which in his heart of hearts he regarded as sustainable. But I will come to the inflationary question in a moment.
I would suggest to the Chancellor that he has been trying to ride two horses—and I do not blame him—not only in talking repeatedly about returning to a fixed parity when circumstances permit, or as soon as possible, but in using the phrase "fixed but flexible parities". I think we need a good deal more emphasis on flexibility and a great deal less emphasis on fixture. Half the major currencies in the world are floating at the present time and many of the catastrophes which in the past some people have expected to follow from that have not so far occurred. I think he must be as impressed as I am by the fact that Mr. Gabriel Hauge, who is by no means an economic Bolshevik—he was President Eisenhower's economic adviser for eight years, I think, and is at present chairman of the Manufacturers Hanover Trust—was forced to say in London a couple of days ago,
I hope that the monetary authorities will take advantage of the time that has been bought to get at some of the fundamental questions, such as, how can a fixed parity currency system be maintained except with bands so broad as to make it virtually a floating system?
For my part—and I speak for myself—I am rather encouraged by the growing fashionableness of the right to float as a permanent element in our currency system until some of the other problems, to which I shall refer later, have been solved. It seems to me that there is no question but that we shall not be able to afford to return to a fixed parity at least during the rest of this year. The Chancellor made the point in his remarks a moment ago that the immediate effect of a devaluation of the currency is to worsen the trading balance, because the cost of imports rises immediately and the increase in the volume of exports takes one-and-a-half or two years to compensate for that. I think he was over-optimistic when he adjured the international community not to take too much notice of the fact that the situation got worse before it got better.
As he pointed out in his remarks this afternoon, the present currency crisis was largely brought on by the very large American deficit during 1972. Yet that was a deficit which everybody should have expected to follow in the 12 months immediately after the Smithsonian agreement. I suggest to him that both Britain and the United States will have much worse deficits in 1973 than would otherwise have been expected, and that unless the international community shows more sense than it showed a fortnight ago, those currencies may come under renewed attack if this proves to be the case.
I have spoken so far about the advantages for Britain in this situation of floating for some period. There is no doubt that they are real, and I think the great majority of hon. Members on both sides of the House agree on this. But, of course, there are also real disadvantages in floating when it means floating down, and the reason the Chancellor is floating now is that he expects to float down, at any rate for the immediate future.
We have floated down, 10 per cent. in the second half of last year and a further 2 per cent. on a weighted average of currencies since the turn of the year. Sinking, which is what this sort of floating is, is a defeat and it carries very serious disadvantages and dangers. I shall not indulge in the hysterical rhetoric which the right hon. Member for Bexley (Mr. Heath) used when the Labour Government devalued in 1967. One advantage of the events of the past few years is that a change in the parity for the worse is no longer regarded as a sin against the Holy Ghost. But, equally, a lowering of the parity carries very real disadvantages with it, and some action is required to correct or compensate for them.
One point which the Chancellor of the Exchequer did not refer to was the effect of the float on the sterling area, or what is left of it. When he talked to us last June he said that he intended the restriction on capital movement from Britain to the sterling area to be "strictly temporary". I hope that the Minister of State will tell us whether "temporary" means indefinite or whether he envisages a return to the previous freedom at least as early as a return to a fixed parity.
It would also be helpful if the Minister told us about the effect of recent currency movements on the Basle agreements. The compensation that we had to pay when we fell below a certain dollar parity we are now no longer obliged to pay. Do we get compensation for that? If we float again below the level fixed, do we start paying again? This is a matter of some importance to both sides of the House, and it is of some moral importance as well because we have real responsibilities of a moral and political nature which most of us have no wish to shrug off.
The other disadvantages of a float down do not lie, as was so often thought in the past, in the inconveniences to traders and banks in carrying on their businesses. There are inconveniences of which I have no doubt the Chancellor of the Exchequer has been made aware, but they seem to be inconveniences with which the City and the trading community can live if they wish to and, what is more, the trading community gets many real advantages from a float.
The real disadvantages flow from the immediate impact on the balance of payments and the inflation inside the country concerned. I come to the balance of payments point now. As the Chancellor of the Exchequer said, the immediate consequence of floating down is to worsen the balance of payments because the cost of imports rises and the volume of exports is slow to increase sufficiently to compensate for this.
Having attempted to study what has been written on these matters, I confess that it seems to me that it is not possible at this stage in the science of economics, if it is a science, to be very clear about the real impact on trading patterns of fairly small adjustments in the parity. One of the most obscure elements in the science of economics is to know how much real price elasticity there is in particular exports and imports to and from particular countries. Perhaps many of us on both sides of the House have been too confident that a gradual float down to a new level will produce the same sort of advantages in terms of the volume of exports and imports as a sudden drop. I wonder whether the psychological effect of a slow float down is quite as beneficial in the long run as that of a dramatic

change. To that extent I share the belief of the hon. Member for South Angus (Mr. Bruce-Gardyne).
If we are failing to solve our internal problems and continue to float down, I agree strongly with the hon. Member for South Angus that the real worry is that the J-effect to which the Chancellor of the Exchequer referred may turn into a U-curve or even a double U-curve. In other words, the effect of speculation based on temporary deterioration in the trade figures may be to depress the value of the currency further so that we start paying for the next move down just as we should be getting the benefit of the first move down.
I do not ask the Chancellor of the Exchequer to make a prediction of the actual effect on the balance of payments of maintaining a 5 per cent. growth rate with a currency which is slightly further devalued than by last year's float. But there is a serious problem here especially because we cannot rely, surprisingly, on those who speculate in currencies taking the long view. There should have been no speculation against the American dollar on the basis of last year's trade figures. Everyone should have expected them to be bad. Everyone should expect them to be bad this year after the further 10 per cent. devaluation. Unfortunately that did not prove to be the case——

Mr. Tapsell: In the context of what the right hon. Gentleman said about a U-curve and a double U-curve, does he not agree that the same applies to the yen in converse? There is no guarantee that the revaluation of the yen will reduce the surplus. It may sharply increase it.

Mr. Healey: I agree with the hon. Gentleman, especially as we cannot be sure that the yen will float cleanly up to any new level and that the Japanese Government will not compensate for any up-valuation of the yen by the imposition of new non-tariff barriers to trade and the removal of some controls on exports. Certainly I take the view, not only for the hon. Gentleman's reason but for those others, that we are far from seeing a situation in which we can have confidence that the role of Japanese trade and currency in the international system will be more benign than over the past few years. I mention this point because it is


too optimistic to assume that those who trade in currencies will be wise enough to wait until the effect of a change in the parity benefits the country which has made the change.
To return to the hon. Member for South Angus—I hate to pay him these continual compliments because we are not always so friendly to each other—the real and serious disadvantage of a devaluation or a float down is its immediate effect on inflation in the country concerned. I felt that the Chancellor of the Exchequer was less than candid about this. He never told the country, as he should have done, that the devaluation of 10 per cent. which the pound suffered in the second half of last year must already have produced an increase in the cost of living of between 2 and 3 per cent. I do not suppose that the right hon. Gentleman would dispute that this may he the fact.
Now we are facing a further devaluation against the weighted average of world currencies in terms of British trade of perhaps 1 per cent., according to the Chancellor of the Exchequer. He said that it would be little more than it was before the recent change in the currency parities. But most people think that it is about 2 per cent. However, there is no doubt that for the European countries in the Community which are now by far our largest trading partners, as the Government never weary of telling us, there has been a devaluation of between 5 and 6 per cent. I confess I prefer the figures given by the Minister of Agriculture, Fisheries and Food. Moreover, the shift in parities last week is likely to affect the price of oil which, because of the currency arrangements for determining its price in Europe, is likely to rise in Britain by about 6 per cent. as a result of the parity changes last week. Incidentally. I hope that if I am wrong about the 6 ner cent. estimate that I have seen, the Minister will reply to this point.
I should guess that the final effect of last week's currency changes, if they last for about a year, would be to add about 1 per cent. to the cost of living this year on top of all the other increases to which we can, if it is the right expression, look forward.
I noticed recently that the Daily Telegraph reckoned that the effect of the

currency changes, plus the common agricultural policy this year and our contribution to the Community budget, would add about 3 per cent. in all to the cost of living this year. I dare say that for once the Daily Telegraph is being too unkind to the Government on this matter. Again, I hope that the Minister, who is certainly quick with all the relevant information, will give us his information later this evening.
We already know some of the things which will happen. We know that 5p is going on bacon in the summer and that there will be a 17 per cent. increase in the price of sugar, in both instances because of the removal of subsidies which have been paid until now. Butter is to rise in price. Steel prices are to rise perhaps as high as 19 per cent. or 20 per cent. Again, the Government have not given us an estimate, but we would like one. The effect of these matters on the Government's major strategy against inflation will be disastrous.
The Chancellor, in one of the few partisan passages in his speech, said that the real lesson of the currency crisis is that the trade unions should be good boys and that the Opposition should tell them to be good boys. However, the real lesson of the crisis is that if the cost of living is rising in ways that the Government cannot directly control, then they have a clear responsibility to try to limit increases in the cost of living where they have the power to do so.
We are still waiting for the Chancellor to answer the questions that I put to him last week when we had our first discussion about the crisis on what he intends to do to keep down the cost of living in this new situation. The Government must take direct action to keep it down where they are in a position to do so if they are to have the moral right or any political chance of an effective appeal to the trade unions and to ordinary working people for restraint in pressing for wage increases.
I do not want to run over the whole row of measures which we would like the Government to take, because we have debated them on many occasions. We are hoping that the Chancellor will take a few of them in his Budget in a fortnight. However, I will mention some of


them. We think it is necessary, particularly in this new situation, for the Government to be prepared to subsidise some foods and to pay for those subsidies by withdrawing the tax concessions made in the last Budget to those living on unearned income or earned income of over £5,000 a year which are due to come into effect at the beginning of phase 2 regarding wages. We still think that the right hon. Gentleman must drop the rent increases of up to 50p which he told us only a few weeks ago he intends to bring forward next April.
We believe that the Chancellor must do something about land prices and housing. We were all tantalised by the Minister's answer to a Question this afternoon which suggested that some tremendous new policy for dealing with speculation in land is coming forward. We are absolutely fascinated by the suggestion that he made and by the brutality with which he rebuffed one of his hon. Friends who wanted to move him in the wrong direction. We shall expect the Chancellor to come forward with some really impressive measures which will clearly have an effect on the prices of both land and housing.
Again, the Chancellor must do something about the terrifying rise in rates which is likely to emerge from the current revaluation. The Treasurer of the Association of Municipal Councils has suggested that the rises could be as high as 141 per cent., and Sir Horace Cutler, not distinguished for his support of Opposition views, expressed the view yesterday that in the GLC generally the average increase would be 30 per cent.

Mr. Tapsell: What has this to do with the international monetary stituation?

Mr. Healey: It has everything to do with it. As the Chancellor pointed out—this was the most important thing he said—everything we do on the international monetary side has a direct impact on the cost of living, the wages that people earn, and whether they have jobs or not.

Mr. Barber: Mr. Barber rose——

Mr. Healey: If we do something in the international monetary sphere which has a negative effect on some of our policies in the domestic sphere, we have a clear responsibility to do other things in the

domestic sphere to compensate for that. This is a debate on the consequences of the monetary crisis. As the hon. Member for South Angus pointed out—I call him to my aid again—a fall in the parity of the pound will increase inflation in Britain.
The Chancellor raised the question of trade union restraint. I suggest that I have your support, Mr. Deputy Speaker, in feeling that I am not only in order, but politically obligated to put the other side of that same question.

Mr. Barber: The right hon. Gentleman referred to something that I said about the effect on the economy, and so on. As a matter of record, I was referring to international monetary reform. He also talked about the effect of devaluation—I think that was the word he used—since the crisis. He may have his opinion and disagree with our assessment in the Treasury, but, speaking as Chancellor of the Exchequer, the best estimate that I can make is that there should be little impact on the total of our trade or on the cost of our imports. We may lose in some markets, but we shall gain in others. However, taken together these effects should broadly balance out. Therefore, if the right hon. Gentleman wishes to talk about a fall in the value of the pound since that crisis, it must be on his responsibility. I do not agree with him.

Mr. Healey: The Chancellor suggested that there had been a fall of 4 per cent. in the value of the pound since immediately before the resolution of the crisis—we shall have to look up the figures in the hour before the crisis was resolved to see what his base line was—vis-â-vis the totality of Common Market currencies.
The Minister of Agriculture, Fisheries and Food—I quoted his words before and I will quote them again—said,
What has happened now is a reduction which will approximate somewhere between 5 per cent. and 6 per cent. as a further depreciation of the pound in relation to European currencies."—[0mciAL REPORT, 21st February 1973; Vol. 851, c. 477.]
The Chancellor may reject his right hon. Friend's view as not worthy of consideration by the House, but I have more respect for the present Minister of Agriculture, Fisheries and Food in his economic rôle than for some other right hon. and hon. Gentlemen who assume similar pretensions.

Mr. Barber: This is an important point. If the right hon. Gentleman wishes to concentrate on only one aspect, all right, let him do it, but that is not what matters. What matters is the effective sterling exchange rate. I have given him our conclusion on that. I hope that he will accept it and not go out of his way to draw other conclusions which are more disadvantageous to this country and do not stand up.

Mr. Healey: I have quoted the Minister of Agriculture, Fisheries and Food. The House can choose between him and the Chancellor of the Exchequer.
The right hon. Gentleman knows that he was responsible, in the second half of last year, for a fall of 10 per cent. in the value of the pound against other world currencies. He knows that there has been a further fall against European currencies, he says, of 4 per cent. The Minister of Agriculture, Fisheries and Food, I presume on Treasury advice, said that the fall was between 5 per cent. and 6 per cent. If the right hon. Gentleman is maintaining that we shall gain more in American markets than we lose in the area of the world which he has repeatedly told us is now by far the most important to us in our trade, I suggest that he is contradicting many remarks that he has made in the past. I stick to what I have said in the terms in which I stated it.
I know that the Chancellor of the Exchequer does not like points being made, but I quote Government figures and ministerial estimates. If we add together all the increases in the cost of living resulting from changes in the parity, resulting from Government policies which they are still free to change but refuse to change, and resulting from increases in world food and commodity prices, millions of ordinary working people in this country will be worse off if the Chancellor's guidelines for prices and incomes are accepted.
The serious point I put to the Chancellor, and I hope he can persuade his hon. Friend to answer it, is this: does he not feel that in this situation, in which the real living standard of many people in this country will otherwise fall, he should go back to the suggestion for a

threshold agreement on wages which the Government themselves made last September? I warn him that unless he is prepared by some such agreement to protect particularly the lower paid workers against the inflationary consequences of his other policies—and also, I readily agree, of international factors over which he has no direct control—he has no chance whatever of making his policy work.

Mr. Bruce-Gardyne: Mr. Bruce-Gardyne rose——

Mr. Healey: I have given way a good deal and have perhaps been led off my track too much particularly by the hon. Member for South Angus.
I now want to return to the international aspects of the crisis. I hope the Chancellor finds what I have to say on the international aspects of the crisis as agreeeable as, clearly he found what I had to say on the national effects of the prices.
Surely the big lesson of the crisis in the international sphere is that many aspects of the communities' approach to international trade and monetary problems are based on fantasies which bear no relation whatever to the real world.
Take the European Monetary Union. I was absolutely staggered that the Chancellor again this afternoon, and apparently at a meeting of the nine Finance Ministers in Brussels a few days ago, reasserted the Government's commitments to bring about a complete European Monetary Union within less than seven years from now. He knows to what he is committing himself. Let me remind him of the statement made by the Community Ministers to define the Union as it should exist, and as he has recommitted himself to create it, by 1980. First, they must form
an individualised monetary grouping within the international system, characterised by the total and irreversible convertibility of currencies, the elimination of the margins of fluctuation of exchange rates and the definitive fixing of foreign exchange parities, all of which are essential conditions for the creation of a single currency.
This has to be done before 1980.
To take another objective to which he has commited himself,
the margins within which the essential elements of the public budgets as a whole must be contained, and in particular the changes in


their volume, the size of their balances and the methods of financing and employing the latter
—in other words, the whole of his economic management policy, the whole of his taxation strategy—
shall be determined not at national level but at community level.
It is fantasy, and dangerous fantasy at that, in the face of what has happened in the last two years to pretend that anything like that is possible within seven years from now.
The plain fact is, if Japan is left out of the reckoning, that sterling has shifted in its value more against the major European currencies than it has against the dollar. The deutschemark, for example, is worth 56 per cent. more than it was worth in terms of sterling six years ago.
It is ludicrous to pretend, if the Chancellor intends, as he clearly does, to retain any national responsibility for growth in Britain or for the pattern of British trade, that there can be agreement to create a single currency or restrict even the margins of fluctuation vis-a-vis the European currencies and still achieve his other economic objectives.
The only thing we can all hope is that he does not believe a word of it himself and that the Prime Minister does not believe it either. We were all heartened, I think, to see the words the Prime Minister used the other day while talking to the American Chamber of Commerce when he insisted on the right of individual adjustments as well as collective adjustments and of the right of Governments to protect growth.
The real difficulty is that so long as he and his fellow Finance Ministers continue to pretend they are committed to this quite unrealistic objective, they are liable to accept measures as steps towards that objective which have no justification, indeed, are totally dangerous and damaging to their interests, except in the context of that objective. The snake in the tunnel agreement which the Prime Minister agreed to violate within six weeks of having become a party to it was a very good example.
I hope, when he and the Prime Minister talk to Mr. Ortoli in the next two days on these questions, that even if he is not prepared to say what he thinks in public, he will say it in private so that there is no longer any misunderstanding.
If the European Monetary Union is a nonsense, then the whole basis of the common agricultural policy collapses. Indeed, Mr. Pompidou pointed out in his Press conference on 22nd September that floating exchange rates meant the death—that was the word he used—of the agricultural common market. He is, of course. right, and we learnt this week that in order to preserve the phantasm of a common agricultural policy and single prices we now have 56 different compensatory amounts in existence to level out agricultural prices within the European Common Market. I am not surprised that the agriculture Ministers decided to give themselves a rest for a month or two before they get to grips again with this problem.
I put this to the Chancellor because he is responsible for protecting Britain's national economic interests in these negotiations. There might have been a case for the common agricultural policy in the middle fifties as a means for compensating France for the damage she then said she expected to encounter in her industrial trade as a result of joining the Common market, though in fact she suffered no damage, but in the middle 70s there is no excuse whatever.
Mr. Giscard d'Estaing was kind enough to tell us only two days ago that by 1980 "the French GNP per head"—whatever he meant by that, and I suppose it was GNP divided by the number of people in the country—would be nearly twice the British GNP. Yet Mr. Giscard d'Estaing continues to insist on agricultural arrangements which would require Britain, according to the Government's own estimates during the negotiations, to pay France across the exchanges £469 million in 1980. This is in addition to the advantages the Government are giving France by surrendering the biggest food market in the world at the cost of Commonwealth producers, compelling the housewife to renounce her right to cheaper food when that is available from outside the Common Market.
One aspect which puzzles us on this side of the House and, I dare say, many people in the country also, about the Prime Minister is that he was a few years ago a dedicated believer in the principles of the market economy and the laws of supply and demand. We all understand that. He explained it, and


he tried to act along those lines when lie took office here. But now he has seen the light, he has been on the road to Damascus. He has now abandoned his faith in the market economy and he is attempting to intervene more directly and more comprehensively in the operation of free enterprise in Britain, I must confess, than any Government I can recall since the war. But if he thinks the principles of the Market are a nonsense for Britain, why does he continue to support those principles as applied to European economic co-operation? That surely is a total nonsense.
We hope that the Prime Minister will find, and communicate to his Chancellor of Exchequer, the same belated realism in his approach to European problems as he started to show in his approach to some of the national problems.
It is only if we base European attitudes in monetary co-operation and agriculture on realism that we have any chance of making progress in the wider international sphere to which the Chancellor referred at the end of his opening remarks.
On the wider international problem, the one fact that last week's crisis has demonstrated beyond belief is the immense bargaining power of the United States in these matters. It has proved that it is possible to devalue the dollar—something which many people believed, for intellectual reasons, was literally impossible, as recently as 1971. It can change its parity with comparatively little effect on its internal prices, because it is so little dependent on foreign trade, compared, for example, with Britain, and already it has inflation far better under control than most of its interlocutors, although there are some signs that, in phase 3 in the United States, inflation is growing very rapidly there too.
But above all, its main international interlocutors, Europe and Japan, both need, and say they need, American security and guarantees in the military field. Finally, even if the President wants to, Congress may prevent him from adopting as liberal an approach to these questions as the rest of us would wish, particularly if his devaluation greatly increases this year's deficit in the United States payment. Even before the recent

crisis, it was estimated that they would show a deficit of some 5,000 million dollars.
The one thing that the Americans have made absolutely clear—it would be folly to ignore this—is that they are not prepared to settle a new long-term monetary arrangement for the world unless, simultaneously, they get a new long-term trading arrangement for the world. As the Chancellor pointed out, monetary changes can have even more effect on the flow of trade than tariffs or tariff changes. Indeed, the fact that the deutschemark has appreciated against the pound sterling by 56 per cent. in the last six years has had far more effect on our mutual trade than any changes in tariff barriers which may come about as a result of our joining the Common Market.
There is no question that, for the American Administration and the Congress, the main target in international trading at the moment is the Common Market's common agricultural policy—which should be our main target as well. What I suggest to the Chancellor is that, if he finds it impossible to persuade his Common Market partners to adopt a procedure in the forthcoming trade and monetary negotiations which is compatible with any chance of success in those negotiations, he would do far better in those fields to ally himself with the United States than with European countries.
There is no time to run over the major issues, which, as the Chancellor said, are highly technical as well as highly political. I think that we would all support—certainly I would—the general position that he put forward in September 1971, particularly in regard to replacing the present reserve currencies by SDRs, although we are rather disappointed that he has not followed up those general propositions with any more detailed statement on the matter, such as Mr. Schultz made—he referred to it at the IMF meeting last September.
I think that the right hon. Gentleman is as keen as we are to try to develop some agreement or machinery—it could be one or the other—to prevent the footloose Euro-currencies and the funds of the multi-national companies from wrecking parities and international currency


agreements—whether such an agreement is sought through the licensing of floating when a currency is under attack or through the setting up of some machinery for imposing some sort of negative interest, for example, on such funds when they move from one country to another.
The lesson of last week's events is that it would be dangerous to agree on new rules about parity changes until agreement had already been reached on the reserve currency problem, on problems of liquidity and on the question of capital movements and shifts of funds which wreck the international economy.
The right hon. Gentleman talked about adopting objective indicators, but I should be grateful if the Minister of State, when he replies, could answer the question that is worrying more and more of us. Once one fixes objective indicators, after which there must be an automatic adjustment of currencies because reserves are either rising or falling, how can one prevent those indicators from becoming widely known? And, once they are widely known, how can one prevent people from speculating on a change in the parity?
People are on a one-way bet once there has been agreement on objective indicators and criteria for parity changes. The moment these indicators appear, they start speculating. Then, of course, they force the adjustment long before it need have taken place, and make a big killing in the process.
The one thing which does emerge, however, is that, on these major issues of trade and currency, there is no chance of finding solutions on a European or Community scale alone. The idea that, faced with footloose Euro-currencies totalling some 100 billion dollars, a European monetary fund could protect the mutual parities between European currencies with a total of, say—I do not know what it will be—10 billion dollars, I suppose, at the absolute outside, has only to be stated to be dismissed.
We must all agree—I believe that the Chancellor accepted this—that the resolution of last week's crisis was not a permanent settlement, or even more than a very temporary settlement, of the currency malaise from which the world has

been suffering in the last 10 years or so. But at least the resolution of that crisis gives us time, time which I am sorry to say—I think the Chancellor implied that he agreed with me—we wasted dreadfully after the Smithsonian Agreement. Little progress was made on these questions last year in the Committee of Twenty or, preceding that, in the Committee of Ten. But we have time now.
We have been warned that there are dangers and disadvantages, particularly in Britain, in some of the consequences and implications of last week's agreements. But there is one great benefit to us, to Europe and to the world. The events of last week have exploded certain myths which blocked a realistic approach by the European Governments and peoples to a resolution of these more than European problems. I hope the Chancellor and the Government will now have the courage to use these new insights into the situation to lead their partners in Europe and in the world towards a more realistic attack on the central issues.

5.28 p.m.

Mr. Reginald Maudling: One of the problems of debating this subject is that it is very difficult to be adequately brief. For that reason, I will not follow the right hon. Member for Leeds, East (Mr. Healey) into his Budget preview, fascinating though it was. The other problem of this subject is the jargon and the way that it changes. In my day, it was "rallonges" and "gold plus green stamps". Now it is "snakes in the tunnel" and "dirty floating". The jargon changes so much that is confuses us and also means that we do not recognise how profound are the changes which have been taking place in the problem itself in the last decade.
It is for this reason that I would like principally to warn any who are hoping for an early and definitive settlement of the world monetary problem that they will be disappointed. They will get the dusty answer reserved for those who are hot for certainty in this life, because this is a problem which shifts, and will go on shifting far too rapidly.
The international monetary system is the servant of world trade and investment and as the patterns of world trade


and investment change, so will the monetary patterns change. Differing growth rates between countries and indeed within countries at different times will give rise to the need for constant change and flexibility.
One of the fascinations of this subject, which is nothing like as dry as some people who do not come to these debates think it is, is that it embraces not only statistics on economics but also the most violent politics and some very deep human instincts. Look at the way in which the adjustment of parities as an economic process has been bedevilled in country after country by purely political considerations. Look at the way in which the problem of the American deficit has been used for political purposes and consider the monetary aggression of France under de Gaulle against the American economy.
Then let us not forget the extraordinary fascination that gold has for men and how this strange metal can produce a sort of frosty smile even in the coldest heart of a gnome of Zurich. All these strange irrationalities, political or mystical almost, bedevil any purely analytical solution of the international monetary problem. Therefore, we are very wrong if we think that any early and definitive solution can be hoped for.
The recent settlement was very good. The results, so far as the yen is concerned, and the European currencies and the dollar, have been as good as possibly could have been negotiated. I do not accept that the effect on our import prices will be what the right hon. Gentleman has said. I believe that the Chancellor is absolutely right. We should concentrate mainly on the price of commodities which we have to import because there is no domestic competitive substitute. When one looks at that and at the flexibility of the commodity markets of the world and the different currencies, one should be very surprised, as I would, if the overall price level in sterling terms of commodity imports changes to any appreciable extent as a result of this settlement.
It is not fair, either, to say that the Americans have got what they wanted, though indeed they did. I have seen it said in distinguished newspapers that this came about because of American political power. But surely the point

is that it is in the interests of the world as a whole that the Americans should get their objectives. If they did not get what they wanted at the Smithsonian talks, perhaps, looking back on it, it is a pity.

Mr. Healey: I entirely agree about this. It is a tragedy that Smithsonian went off, as it did, at half cock. My point concerned the forthcoming negotiations on trade and currency where there is a disposition in Europe to regard American demands for linking trade and currency together, for example, as totally unreasonable. The American position is a very rational one, particularly for the United States in their circumstances.

Mr. Maudling: I agree. The right hon. Gentleman seemed to be suggesting that in the recent negotiations the Americans had got away with too much. I am happy that he was not saying that. The other lesson of the recent so-called crisis is that it was not really a crisis on the scale people believed. The system stood up to the problem far better than many expected. Some of the rather gloomy predictions about world depression and recession never came to pass. The main people whom one should console are the Germans, who lost about 600 million dollars in supporting the dollar—a good deal less than Britain lost in supporting sterling in 1967, but I shall not go into that.
One must feel sympathy for the Germans for, after all, they are not running a large balance-of-payments surplus. Indeed, their invisible deficit, I understand cancels out their total trade surplus. But I believe that this particular crisis did not really exist. It was an urgent situation calling for urgent readjustments of parities, and these adjustments were brought about and have proved that the old Bretton Woods system still, by and large, was not such a bad one as is sometimes said.
The nature of the problem has changed very much since Bretton Woods. Then, people were obsessed with the possible dominance of the dollar in world markets, obsessed with trade discrimination and with the possibilities of competitive devaluation. Certainly the problems have changed since then. However, two or three things were not foreseen. First,


as I have said, the political resistance to parity adjustments has really prevented the sort of flexibility that the Bretton Woods system was designed to provide for the world. Secondly, I do not think that anyone foresaw then the emergence of the dollar deficit as the greatest problem of the international monetary scene. This deficit has been and remains both a blessing and a curse.
Without the American deficit the financing of the expansion of world trade over the last 10 years would have been totally impossible. Gold could not have carried it. It is a barbarous process to try to rest the international supply of purchasing power on the accident of the rate of production of a particular mineral in certain parts of the world. The reserve currencies could not carry it all, for they are domestic as well as international currencies. One man's reserve is another man's debt. Therefore, there is a clear limit to the extent to which reserve currencies can carry the strain.
The American deficit has been the cause of much international friction, both political and monetary—the continued French resistance and objection to its existence, the continued and often justified criticism that American industry was able to finance its own investment in Europe on the basis of cheap European funds, and the long and persistent argument between the soft money men and the hard money men. The soft money men argued that the problem in international liquidity was to provide adequate liquidity to ensure that the growth of trade continued. The argument of the hard money men being that if one had too much liquidity one promoted world inflation and world rising prices.
This argument has continued for many years. On the whole, the European Community countries tended to be the hard money men, whereas we, the Americans and the Scandinavians, and I think the Japanese, tended to be the soft money men. It has been a policy of succeeding British Governments to try to find other international reserve assets which could take the burden of gold, sterling and dollars. Certainly in 1962 we advanced a proposal for a Mutual Currency Fund.

It did not go with a swing at the time, but a year or two later it provided the foundation for the SDR negotiations. Since then, the position of the dollar has been eased by a series of devices starting with Roosa bonds, moving through non-convertibility, leading to the new discovery that the dollar can be devalued.
The importance of this latest discovery is that it means that in future the dollar, like other reserve currency, can be a currency in the true sense and can adjust to the requirements of the international monetary situation with the benefit not only to America but also to her trading partners.
The other great change in the whole picture has been the growth of capital movements. It is astonishing how the funds have grown. I remember that when I was Chancellor of the Exchequer if about £20 million moved out of the reserves in a day we started to worry quite a lot. Now it is 10 or 20 times that amount—I do not know the exact figures. But movements over the last three or four years have been very much greater than they were 10 years ago. There has been an enormous growth of the Euro-currency market. While it might be reduced by United States abolition of the interest equalisation tax, it will continue to be a very large source of funds indeed, and it will be joined by the possibly enormous sums of currencies that will accumulate to the oil-producing countries of the Middle East over the next 10 years. This is one of the biggest problems which will have to be tackled in any change in the modern monetary pattern.
The right hon. Gentleman kept referring to speculative movements of funds. This is a misleading word. The fact is that these large Euro-currency funds and other balances are held by people in particular currencies, and if they think that a currency is softening and weakening it is a matter of simple prudence to move them somewhere else. That cannot be described as speculative any more than the leads and lags which affect current balances. These are inevitably problems which will continue as long as people have large international funds. What we need are new techniques for the adjustment process, and I should like to suggest one or two.
The first is a continued and even clearer recognition of the mutual responsibility of creditor and debtor countries. The recent agreement underlined that very well, and it must be continued. Secondly, I do not believe that a floating system is the cure to the sort of movements we have had recently, because the sort of movements one gets when capital flows across the exchanges are very artificial and so totally out of line with any trade movement that any movement of the currency which would deal with one's capital movements problem is bound to distort world trade. No floating system will deal with this problem. I have often tried to make up my mind about exactly what the right answer is on the principle of floating currencies.

Mr. Ridley: My right hon. Friend cannot ignore the fact that in this very recent crisis there was no great movement into or out of this country, because with our currency floating it was able to be at such a rate that it really was not worth speculating against. Is not that some evidence that floating stops these large capital movements destroying one's position?

Mr. Maudling: I do not think that that was so. One looks at the relative position of the deutschemark and the yen, the two currencies most likely to move upwards. The yen was very little affected because of their exchange control, but the deutschemark was very much affected, because their exchange control was left wide open. Surely it is not so much the rate as the possibility of future movement and the question of the extent to which funds can actually move.
The reason that sterling was on the sidelines recently was that current valuation of sterling on a float basis was generally expected to remain about the same, and by and large this has been borne out by the recent negotiation. It was, of course, the policy not only of the British Government but of virtually the whole sterling area and the Commonwealth in the early 1950's during the period called the collective approach to convertibility. They all were committed to a floating rate and we were driven off it in 1955 at the meeting of the Bank & Fund in Turkey where the

pressure of world banking opinion forced us to pin ourselves to the mast of a fixed rate. Whether that was right or wrong it was inevitable.
Since then, however, I have come more to believe that while there cannot be a theoretical float in the sense that no Government can totally ignore the valuation of its currency, all governments and monetary authorities will always, to some extent, control the current value of their currencies.
In spite of the fact that there cannot be a completely free float, there are, however, obviously advantages more often than there were in the technique of floating from time to time in particular circumstances, and specially where time is needed either to get currency adjustment more properly capable of judgment, or in order to get changes in the actual monetary system. I am sure the float has come to stay more often than it did, but I am equally sure that floating in itself is not the answer to the long-term international monetary problems.
What we shall see, I believe, is an extension of the two-tier system. The situation arises where the changes of parity required to meet a capital situation are totally different from the change required to meet a current situation and the recent position of the deutschemark is an obvious example of this. The logic of this appears to be that over the years there will be more and more examples of the two-tier system possibly becoming institutionalised on a worldwide basis.
The only other point I want to make is about Europe. Without in any way wanting to go back on the concept of European monetary union, I think that it is right to think again very realistically 'about its timing. The Chancellor knows that I have always been sceptical about the timing envisaged, certainly in Europe, about the move to monetary union and a common currency. I have always been surprised that the French, with their particular political and logical outlook, should attach so much importance to monetary union. I suspect that this is something to do with the fact that the words "union" and "unity" have slightly different meanings in English and French. I am sure that we have always been slightly at loggerheads about this.
The European payments Union, as we had before convertibility, was effective and viable machinery but I cannot help thinking that a single common currency should conic at the last stage in the development of an economic entity and not at the early stages, and it would be a mistake to try to push its growth ahead too fast, rather than let it grow naturally. A common currency means common reserves, a common policy, a common institution to supervise that policy and a common parliamentary set-up to supervise, again in democratic terms, this institution. That is what is meant by a common currency, and while it should remain an ultimate objective of our European policy we might be wise to survey the timing once again with our colleagues and see whether we are not in danger possibly of being diverted a little from the basic international problems of monetary matters into too much consideration for the European ones. I put this forward with diffidence because the Chancellor will remember that we have talked about this in the past.
To sum up, we shall not get an early and complete answer to these problems but we have considerable grounds for being satisfied with the resilience of the present system and with the details of the recently negotiated settlement.

5.44 p.m.

Mr. Robert Sheldon: The right hon. Member for Barnet (Mr. Maudling) pointed out two of the factors in the present crisis which led up to it. In particular he outlined the monetary pattern which depends on the trade pattern and he pointed out, too, that money moves around rather more easily today than it used to.
I believe that monetary crises will become rather more common in the future than they have been in the past for these main reasons. Not only is money capable of moving around quickly but trade, as a proportion of the gross national product of all trading countries, has increased at an enormous rate. There has been a virtual explosion of world trade in the last decade. The 1963 figures show that world exports amounted to 136 billion dollars, but by 1972 they were at a level of 369 billion dollars, almost trebling in those nine years. That means that leads

and lags very much increased. Coupled to that, of course, was the increasing role played by the multinational companies. Having the ability to manipulate these large increases in trade and the funds that derive from them, they were thus able to shift some of the results of this trade across exchanges in a way which was obviously not disadvantageous to them.
I would agree with the right hon. Member and not call that speculation. It is not unreasonable to expect a person selling to Germany not to rush a German customer into paying him too quickly. And in the case of a British importer it would not be unreasonable for him to pay his bills more promptly than usual. I do not call that speculation. I call it an obvious consequence of a currency not being at the rate that those traders concerned expected it to be for any length of time. Many barriers have been suggested against the flow of funds that we have seen recently. I am very sceptical about how further artificial barriers, could be erected in any way that could cut out any anticipation of the movement of capital. One thing that is important is that these currency crises operate against the advantage of traders and in so far as they pose a danger to increasing world trade they are much more serious than might otherwise be the case. It is a question not of trying to cut down the flow of funds but of trying to maintain and extend the flow of trade.
I suppose that I should here pin my colours to the mast as other people will need to do. I am in favour of fixed parities; I believe that their enormous advantages are still with us. The way in which international trade is coming to be an extension of the home-based trade is one such important development. Things were different in pre-war years when shipments used to be made on the basis of individual consignments, very frequently against letters of credit, whereby guarantees could be obtained by those traders concerned. If there were any foreign exchange risk there was always the possibility of hedging in the forward market. But that was how trade used to be conducted. Now it is very much more a continuous process similar to trade on the home market with regular monthly deliveries maintaining high levels of supplies. In such a situation,


it becomes much harder to initiate a completely satisfactory way of protecting either the exporter in this country or the customer overseas. Faced with the present kind of crisis, manufacturers and customers take the only steps open to them, by widening their profit margins to allow for problems. That in itself is a further barrier to trade.
Pricing under a floating rate presents other problems of a different kind. The manufacturer, who is not always a large organisation, is asked to take a view of future parities. The lack of facilities for hedging in the forward market makes it even more hazardous.
I accept, as the right hon. Member for Barnet accepted, the need to float from time to time in a difficult situation when the temperature of the market must be tested. The best test is obviously a clean float to see whether the ideas of the parity are approximately in line with those of outside opinion.
But there is one exception to my support for fixed parities. Although I am in favour of them generally, in the present state of uncertainty, if we are to face devaluations and revaluations of the frequency that we now see, any advantages from a fixed parity disappear and we might as well float. But I very much hope that at the end of the day we shall find ourselves in a situation in which differences between inflation rates and productivity rates in different countries are not quite so large as they have been in the past, and will permit a much greater degree of comparison and so enable fixed rates to return.
Japan was fundamentally the reason for the present crisis, because it has been in a position of enormous industrial advantage, being allowed by other industrialised countries to build up its own industry to a size that has increased year by year and poses threats to other countries. The situation has been brought about by Japans' attitude not only in world currency operations but in her own industrial policies. Eventually a warning will have to go to Japan that it cannot be permitted to continue to build up its industry indefinitely at the expense of those countries to which it expects to export ever-increasing quantities.
Those who look at the floating arrangements being carried out in Japan

cannot deny that it looks very unlike a clean float, which we might have expected to be a condition demanded by those who met to settle the currency crisis. As my right hon. Friend the Member for Leeds, East (Mr. Healey) pointed out, the revaluation of the yen is likely to be offset by the ending of the rather doubtful controls that were supposed to limit its exports.
The fundamental advantage that Japan has had over the years has been its under-valued currency, which it has been able to maintain year after year. It enabled it to build up Japanese industry, particularly in electronics, optics and motor vehicles. Electronics and optics are the very industries that will play a crucial rôle towards the end of the century. Japan's advantage in its preeminence in precisely those industries cannot be allowed to continue indefinitely at the expense of our comparable industries.
I look at the situation of Japan with some envy. I partly wish that we had done some of the things that Japan has done, but I should never have expected our country to do them as ruthlessly, with the setting-up of MITI and the Government's control of industry and the operation of the yen. Their fierce control of imports and savage restriction of any kind of foreign investment which they felt might harm their industry has enabled the Japanese, and is continuing to enable them, to enjoy a level of increases in production which is rightly the envy of the world. But the rest of the world is having to pay for the advantages that Japan enjoys.
We shall have to act in concert with other countries to bring some of Japan's special advantages to an end. I have never been in any doubt about the advantage to an industrial country of having an under-valued currency. I had assumed that the Chancellor of the Exchequer had come round to that point of view. I thought that his statement in last year's Budget speech implied an acceptance that within reasonable limits an under-valued currency was something he hoped to achieve to benefit our industry and enable it to export. But his comments today surprised me.
My right hon. Friend the Member for Leeds, East immediately took up the


Chancellor's statement that industrial unions could make no greater service than not to weaken sterling in a way which would lead to a devaluation. That statement can be considered in a number of ways, but one of them means that we are back in the old treadmill of trying to maintain the parity of the pound and treat it as a symbol. I thought that that had ended some years ago, when we used to talk about devaluation leading to a reduction in the standard of living, and meaning that we were selling our goods too cheaply. We looked only at that one, narrow aspect.
If used properly, devaluation enables us to establish wider markets for industrial products. With wider markets, we make more goods more cheaply and more efficiently. The devaluation that I favour is not the gentle floating downward kind but a purposive devaluation which has as its intention not to accept a rate that other countries think right but to set a rate that will provide advantages for our industry. In the past few years there has been a whole series of missed opportunities, not excepting the present floating downwards. Such a devaluation policy as I have described, which need not be shouted from the housetops—I should not be referring to it in quite this way if I thought it were a policy that the Chancellor might come to accept—would be the greatest argument of all for some sort of incomes agreement.
The tragedy of the past is that we have always tried to get an agreement on incomes at the wrong time. In 1966, we tried to get one as as substitute for devaluation. It proved disastrous because if one finds that one's inflation is reduced as a result of such a policy by 1 per cent. a year, it takes 14 years to make up for the alternative of devaluation. The present Government's incomes policy is one of last resort, taken because everything else had failed. They are trying to slow down the rate of inflation by means of it. But if instead we used incomes policy in the period immediately following a purposive devaluation, we could—I put it no higher—get industrial expansion at a time when import prices rise and get the kind of take-off which has always eluded us.
The first decision to be taken is whether the Government want an undervalued currency. Once we know that, we can

decide on the means of achieving it. The situation which used to exist, in which countries were proud of the high standing of their currency, has been slightly altered. There is a possibility, which did not exist to the same extent before, of competitive devaluations. Other countries are likely to wish to have their currencies undervalued as well. But one may well find that there are no longer so many obliging countries prepared for a high valuation of their currency, as we were not so long ago. Therefore, the first step must be to decide whether we want an undervalued currency. If we do, we have to decide how to go about it. Once we do that, with agreement from the United Nations as to how it should be put into effect, we have a chance of getting the kind of industrial expansion which would come from the resulting increases in the markets.
What is probably valuable in the world is not a greatly undervalued currency, as the yen is even now. What is valuable is a moderate undervaluation of our currency which may produce an expansion of our exports relative to the expansion of exports of other countries. If we could achieve this, we could help the modernisation and development of our industry, which should be the prime economic objective of the country.

6.3 p.m.

Mr. Nicholas Ridley: It may be irrelevant and even irreverent, but it always surprises me, when I think back, that when the present Government came into office we had a fixed parity and fixed interest rates, and floating wages and floating prices. Now, two and a half years later, we have a floating parity and floating interest rates, and fixed wages and fixed prices. I think that the hon. Member for Ashton-under-Lyne (Mr. Sheldon) was correct in identifying himself both with fixed wages and prices and with fixed parities. If one takes the view that one should control the indicators—the prices—of these vital commodities in our economy, he has come to a consistent conclusion. I believe that it is better to let all these indicators find their own price in the market, and that is why I am not happy to fix any of the four—prices, wages, interest rates or currency.
The factors, in my opinion, which go to make up the price of a currency on any


day are highly complex and very difficult to disentangle. It is obvious that a major factor is the rate of inflation of the country. Another is its trade performance. Another is its economic growth and productivity. That is not all. There is the expectation of the purchasers and sellers of the currency as to how these factors will develop, which also determines the price at which they are prepared to buy and sell the currency concerned. It is my humble opinion that the expectation of the rate of inflation of a currency may well be the most important of the factors which determine the price at which any currency floats—always, of course, provided the float is reasonably clean.
It is interesting, therefore, to see how it is that we could deal with these problems not only of the realities of economic performance but of the expectations of them. One sees that the Common Market countries recently have attempted to control inflation through the operation of their deficits, by reducing or increasing the deficits or by putting taxes up, as Germany has done. Indeed, monetary policy is probably the greatest determinant of the rate of inflation. So the whole thing ties up.
With a properly controlled economy, the rate of inflation can be reduced. I believe that so long as we have economies which are inflating at differential rates because they have different policies—money supply, deficit financing and so on—we are bound to get strains between countries with different rates of inflation.
The system of fixing their parities—the one in relation to the other—is always bound to come to grief if there is a significant movement in the expectations of the rate of inflation of each of the currencies. It does not help very much to set bands between which a currency can move up or down because the moment that currency is seen to be approaching the top or the bottom of the bands it attracts speculators, as they have been wrongly called—those who are fearsome of losing the value of their assets. They are bound to think of moving their money the moment they see the value of the currency getting closer to the limits at which it will be maintained. The trouble with the snake in the tunnel is

that when the snake begins to touch the top or the bottom it sets off extensive movements in hot money which in the end has to break the tunnel. This is why I do not see that fixed exchange rates can ever guard us against flows of hot capital. In my opinion, they cause them.
This applies, as my right hon. Friend the Chancellor of the Exchequer said, to the two-tier system, because all one is doing there is fixing not only one rate for domestic and ordinary trading purposes but another rate for the exchange of capital, particularly short-term capital. One is more likely to make a mistake in trying to fix two rates than one is in trying to fix only one rate.
It is apparent that floating is becoming more and more fashionable. I was delighted to hear the right hon. Member for Leeds, East (Mr. Healey), in one of the most encouraging speeches I have heard him make for a long time, coming close to accepting that proposal. My right hon. Friends have floated successfully for seven or eight months without any apparent damage. Other countries have floated from time to time, such as Canada and Japan—although it is a little early to say how clean that float has been—and Italy. These countries have noticed that the great speculative flows have passed them by.
It seems that we could be a little bolder in our support of floating currencies. There are protestations on all sides that we intend to fix again. It is rather like the 10 green bottles, hanging on the wall. Every year another bottle accidentally falls. Once it has fallen it never seems to be possible to put it back on the wall, and I for one am delighted that that should be so.
We have to deal with the disadvantages of floating which are often canvassed. The first one has now melted away. The first oft-quoted disadvantage was that it meant that businessmen could not estimate ahead what they would have to pay. Admittedly our forward foreign exchange markets will have to adapt to dealing with that but I was once a businessman and I used to build factories and heavy engineering structures. I never knew two years ahead what the price of cement, building labour or plant hire would be.
There are all these uncertainties in industry. This is what contracting is; it is making the best guess possible about the future price of the ingredients of the tender. To add one more ingredient to a long list in any tender does not seem to be asking too much of human nature. I believe it is now generally accepted that this was more in the nature of an argument of bankers by which they could make certain profits without having to take much risk rather than a genuine objection to floating
The second disadvantage, which my hon. Friend the Member for South Angus (Mr. Bruce-Gardyne) stresses, is that floating rates give no discipline to a Government to maintain the value of their currency. If we can gently float down through over-inflating, through deficit financing, through what my right hon. Friend the Member for Barnet (Mr. Maudling) called soft money policies, it is said that there is no reason why we should ever stop. There is no crisis to bring us up sharp. This is true. If we had had a fixed pound for the last seven months we would certainly have had a balance of payments crisis by now. If we had remained fixed after the June crisis we would have been under pressure already because we are deliberately inflating the value of cur currency.
The Chancellor said in his Budget that he would do a little reflating. So we reflate, inflate, and the value of our currency goes down. But it has never been obvious to me, looking at our recent economic history, that the fact that we had fixer parities until last June resulted in a great discipline upon British Governments. It is not as if they are prepared to achieve a great deal in terms of discipline. It also resulted in the phenomenon of "stop-go" which was universally unpopular because when the balance of payments started to go wrong it had to be "stop". This was bad for business. Certainly the long-drawn-out battle for the parity of the pound which the Labour Party had to fight resulted in much more loss than gain. I do not know whether discipline should not start earlier if we must have it. It starts when the Budget is made up.
The third objection to floating—there may be others but this is the third one I want to deal with—is the European one.

I speak as one who has been as keen as any that we should become members of the European Community. I recognise that it is not easy to justify each of the members of the Community floating against each other at present. My right hon. Friend the Member for Barnet takes a different view, but he probably agrees that there are advantages in a European float against the dollar. Certainly the right hon. Member for Leeds, East liked the idea. It does not generally seem to be thought of as a bad idea. But few suggest that the European currencies should, for the time being float against each other.
This is because President Pompidou, and President de Gaulle before him, made such a tremendous thing of the common agricultural policy, and the need to have fixed rates of exchange for it to work successfully, that it has somehow automatically been ruled out of court in European circles. What has happened? The Germans have revalued three times, the French have been up and down once or twice and other countries in the Common Market have in the past changed their fixed parities in relation to others. This causes just as much havoc to the common price structure of the common agricultural policy as would floating rates. As the right hon. Gentleman said, there are so many derogations from the CAP that it is not meaningful any more.
If my original thesis was right, that it is probably the rates of inflation together with industrial efficiency—but principally the former—which determine the way in which the values of currencies move, what is essential before we can have either a common agricultural policy of the sort envisaged in the Treaty of Rome or a common European currency, which is the most important subject on the horizon, is that we should have a common rate of inflation and industrial growth. Until that is achieved, there is no merit in forming fixed parities between the member States of the Community. What disappoints me is that we have not made a start in achieving common budgetary policies for Europe.
At the summit meeting my right hon. Friend the Prime Minister agreed to start talks which would have had the effect of bringing the problem of inflation to a common level throughout Europe. There was to be a common policy about money


stock and the growth thereof. From the very first day we opted out and said "No, we have a serious problem with unemployment and our other problems. We cannot subscribe to the pure letter of that law." We were excused. It was by saying "Yes" on that occasion, by agreeing to try to get as near as possible to a common rate of deficit financing for Europe, that the first real steps towards a common currency for Europe and a true common agricultural policy could have been taken.
I urge the Government to go back to the meetings of the Finance Ministers of the Community and try to make much better progress towards common budgetary and monetary policies for the Nine. It will take time. I do not pretend it can be done quickly. The short-run situation and circumstances in each country will have to predominate for a brief time. But unless the will is there to adopt these common policies there can be no movement towards a common currency for Europe. If there cannot be that movement it is idle to try to achieve fixed parities within the Common Market.
Now that we are members of the Community and not likely to be blackballed for such an attitude, I congratulate my right hon. Friends on having survived 1st January with the pound still floating. Long may it continue to float and may they prevail upon their European partners, may they negotiate and fight, to have floating currencies within Europe until Europe is prepared to have common economic policies which will enable it to have one common currency.

6.18 p.m.

Mr. Tam Dalyell: Those of us who have spent a considerable percentage of our waking hours in the last three weeks cocooned in Committee Room 10 on the Counter-Inflation Bill have learned to regard highly the constructing argument and dulcet tones of the hon. Member for Cirencester and Tewkesbury (Mr. Ridley). I envy the elegance, often the wit and certainly the choice of words which he puts forward his arguments; whether one agrees with them or not, is another matter. I suppose that in following him one could say that we are all floaters now.
I was struck by something that was said by the right hon. Member for Barnet (Mr. Maudling). He said that we used to

live in a period when £20 million one way or the other would be a cause for sleepness nights among Treasury Ministers. How times have changed! Sometimes in a debate like this, and today when the Chancellor of the Exchequer was speaking—and indeed when my right hon. Friend the Member for Leeds, East (Mr. Healey) was speaking—one is tempted to wonder what all the fuss is about and the agonies which two Governments have gone through, both the Labour Government and the previous Conservative Government. Therefore, one must welcome a change in the international climate, and perhaps a more relaxed climate.
Yet I wonder whether we are right to be relaxed, because next time it might be us. I think that it would be very unwise, when our roof for the moment seems not to be letting in water, not to take precautions against the storm, because it may well be that another financial storm may come. If we are not in the eye of the hurricane, now—when sterling is not under any great pressure—is the time to reflect seriously on what ought to be done. Therefore this debate is peculiarly timely.
The Chancellor made a very important statement or announcement—I will not say a revelation—this afternoon when he said that a substantial study was being undertaken of whether the European Common Market countries could float together. I think that all of us have been pondering this question. I ask the Minister of State, when he replies to the debate, to reflect on two particular items. First, is it possible for countries to float together if their growth rates are substantially different? If their growth rates are substantially different, can we have such a thing as a common float? I should have thought that if there was more than a marginal difference in growth rate, there would be very real difficulties about any kind of common float.
The second thing on which I ask for Treasury reflection is whether we can have a meaningful common float when there are tight exchange controls in one country, such as the United Kingdom and relatively loose exchange controls in another country, such as Germany. Does this mean harmonisation and synchronisation of exchange controls as we now know them? I put this as a question but


I have grave doubts whether one could talks in terms of anything like a common float unless these conditions were met, both in the growth rate and in harmony in exchange control.
I suppose what worries many of us is that we are faced with what looks like an extremely and increasingly chauvinistic United States policy. We have to face the fact that, in spite of some adjustments here and there and, doubtless, good will at meetings, there is the possibility or the prospect of United States chauvinistic policy in relation to trade, certainly a chauvinistic policy in relation to currency and a chauvinistic policy in relation to investment flows. It may well be that the countries of Europe will be hard pressed unless we are prepared to face this together. I do not know whether a common float is the way to do it, but I know that this country's difficulty exists and that there is a very real problem of chauvinism in the United States on trade, on currency and on investment flows.
I should like to hear some comment as to whether the Finance Ministers in the British Government agree that we are right to talk in terms of possible United States chauvinism, particularly in relation to investment flows, and, if so, what protective measures will be taken in time. As I see it, there is a situation in the United States at the moment in which Congressman Wilbur Mills and Treasury Secretary Shultz are actually in cahoot and any idea that there is tension between them is perhaps a pretence on the issue of the surcharge. We have had Wilbur Mills saying that he would like a 15 per cent. surcharge on imports and the Treasury Secretary saying that it had better be 10 per cent.
In a sense this is preparing us—I do not say "softening us up," but preparing us—for a situation in which the countries of Europe will be accustomed to the prospect of a surcharge and can accept it very meekly. Considering the relationship particularly through the multinational companies that many of us represent and which employ many of our constituents, I should have thought that an aggressive policy of United States import surcharges ought to bring the strongest representations from any British Government either by itself or in con-

sonance with other European Governments.
In particular I wish to ask about something which has not been mentioned in this debate: that is the meeting between Sir Christopher Soames and President Nixon. There was a report following that meeting that the Americans were taking the attitude "We shall not be rough on the currency or in financial matters provided you, in Britain and the EEC, let in our grain supplies." This was the report in Saturday's Guardian by a very good journalist, Simon Winchester. Simon Winchester does not write things unless there is some foundation for doing so. There has been no explicit denial of that report. I therefore ask whether there has been any pressure from the American Government on Britain in particular and the EEC in general to let in American grain supplies. Are they asking for any kind of quid pro quo and are we discussing any quid pro quo on our part? This would seem to be important.
One of the reasons why I raise the question of a common float is that one wonders whether there may be a coordinated regional policy under this kind of system. Some of us from the regions are very alarmed to hear that the legitimacy of the regional employment system, which for two years—whatever my right hon. Friend the Member for Battersea, North (Mr. Jay) may say—many of us believed was in harmony with the EEC regulations, is in question. Now one understands that this is under discussion. I admit that I might have been naïve about this and my right hon. Friend has every justification for smiling, but I am one who believed that the regional employment premium was safeguarded in the Common Market and we nut direct questions on these lines. It now appears from answers to Questions that this was not so. I put this in the form of a question. Does REP stand up in the present set-up and what would happen to REP, which is absolutely vital for investment expectation in the regions under a common float policy?
I turn to special drawing rights. I understood the Chancellor to say that discussions had been primarily directed to the balance of payments adjustment process and the exchange rate mechanism


in a reformed system, together with the whole complex of reserve assets and convertibility. Discussion is now required on a possible link between the allocation of SDRs and the financing of economic development—the so-called SDR aid link—and the problem of capital movements. The Chancellor went on to say that these were complex questions, that it would be wrong to pretend otherwise and that they raised issues of a highly technical and political character. I should like to know precisely what he had in mind and what is the political character of the argument about SDRs. The right hon. Gentleman said that several elements of reform were inter-related in a number of important respects and that discussions had been constructive. I should like to know a good deal more about it, particularly in relation to developing countries.
I interrupted the Chancellor on the problem of identifying the flows of major funds between nations. I asked whether this had anything to do with multinational companies, and I think I am right in interpreting his answer as being emphatically "Yes, this has a lot to do with it". In his opinion my interrogatory question was very relevant. Has this problem been referred to the Morse Committee——

The Minister of State, Treasury (Mr. John Nott): As I have so much to answer in my half-hour winding-up speech, I will say now that the whole question of the link and size of SDR allocations is one of the principal matters being considered by the Morse Committee.

Mr. Dalyell: This is an urgent problem. I suspect that Jeremy Morse will be as quick as he can in making his report, but any group of 20 inevitably takes time, and next time there is an economic squall we may have the same problem all over again. I go back to my analogy of doing something about it while the storm is not on and the roof is relatively tight.
I suspect that foreign direct investments and the profits of the United States internationals are being discussed along with taxes on portfolio capital. I think that the Minister of State is to say something about this. I asked about the interest equalisation tax. I will not say that the Chancellor evaded the question, but he said that it would be answered in

the winding-up speech. At present the tax is 11½ per cent. on the capital value of loan or share issue. I understand that it deprives American financial institutions of foreign underwriting. In a sense it is linked with the take-up by American money of industries in Europe and, although I would not go along with him, perhaps this was what General de Gaulle feared most.
What is being done on a European basis about foreign direct investment by the United States and the changing of a law that Wall Street does not like very much? What is being done about tax equalisation and the possibility that the Senate will not continue it, as the President wants, for the next 18 months but will bring it to an end at the end of March?
On exchange equalisation controls, which may have the effect—as they are often designed to have—of making New York as important a capital market as London, again a Treasury view would be worth while.
One other subject which should be discussed in this context is, how, if we are to have a common float, the level of public spending between EEC countries can be synchronised. I am thinking of, for example, estuarial pollution, a subject that is becoming increasingly important to many of us. Hon. Members whose constituencies are on the banks of the Forth, the Clyde, the Tyne, the Mersey, or the Humber know all about it.
The Royal Commission on the Environment, under Sir Eric Ashby, has made many expensive recommendations, and we have today the excellent report of Mrs. Elizabeth Porter. There can be no coherent policy if the levels of public spending in one country are absolutely out of gear with the levels of public spending in another. Therefore I hope that the financiers, when they discuss massive public spending, will include in their discussions not only the Tees, Humber, Clyde and Mersey estuaries but also the Rhine estuary.
A good deal has been said about Japan. Those of us who have had the good fortune to visit Japan know that it has the greatest pollution problems in the world. Japan needs a public spending programme and concentration on the problems of private squalor more than


any other country. The Japanese, for all their wealth and success at one level, have perhaps failed more than any of us in the quality of their environment.
It may be asked how this is relevant to an international monetary debate. It is extremely relevant. If the level of public spending in Japan were anything like the level of public spending in Europe, we should not be worrying to the extent we are about the nub issue which is, as the hon. Member for Kingston-upon-Thames (Mr. Norman Lamont) mentioned at Question Time, the level of the yen. Therefore, my arguments about pollution are not as circumlocutory as they appear to be. If the Japanese could be persuaded to do what is any Government's duty to its citizens and have a massive public spending programme for the Tokyo and Osaka complexes, many of our monetary problems might be eased. I am not asking for a level of military spending by the Japanese in line with European level of military spending.
If the yen is at the heart of the matter, the international financiers should have discussions on how this problem can be solved. It is not a miracle answer or a panacea answer, but I stick to it in the face of ribaldry. If the Japanese could be persuaded to do something about their pollution, to have a massive public spending programme and perhaps to buy the anti-pollution, reclamation and recycling equipment now being made in Western Europe, some of the problems that most worry us today would be solved.
When the international financiers, the Morse Committee and others get round the table and talk, I hope that the level and scope of their discussion will be a good deal wider than the technicalities of the bullion market, and exchange controls. I do not suggest that these are not critically important issues. All I say is that I hope the discussions will be in the wider context of public spending and that the Morse Committee, the British Government and others will take these matters, such as the level of Japanese public spending into account.

6.39 p.m.

Sir Henry d'Avigdor-Goldsmid: The hon. Member for

West Lothian (Mr. Dalyell) is a relative newcomer in financial debates. We have not often had the pleasure of hearing him, and he covered a wide field. I do not remember having heard much about estuarial pollution in previous finance debates, but I do not say that it is unwelcome.
I was interested in the hon. Gentleman's references to the United States. He brought in the word "chauvinistic" no less than six times in one breath. I know that word only in connection with male pigs and the female liberation movement. I do not know whether the hon. Gentleman spends his spare time in their company, but the association was a little strong. I was also rather tickled at the idea that an old gentleman, Wilbur Mills, who is chairman of a very important committee in the United States Senate, should be someone who could be softened up. He is the most crusty old gentleman it has ever been my pleasure to meet.

Mr. Dalyell: I said Mr. Mills was softening us up.

Sir H. d'Avigdor-Goldsmid: I am grateful to the hon. Gentleman for putting me right.
I want to start by saying something which I believe to be wholly uncontroversial to both sides of the House. Since our last debate we have had news of the impending retirement of the Governor of the Bank of England. It is not for me to say anything about him in the conduct of his office, save in one connection only—the great service he rendered to the Bank and to this House when he came and gave evidence for the best part of six consecutive months to the Select Committee on Nationalised Industries. There had been a long legacy of mistrust between the Bank of England and the House of Commons which I believe certainly went back to Lord Macmillan's Committee on Finance and Industry which sat in 1930 and published its report in June 1931.
Lord Keynes was a member of that Committee, as was Mr. Reginald McKenna, and both were longing to get the Governor of the Bank of England, then Montagu Norman, to give evidence; but he showed no willingness to do so. Eventually he was dragged out and he gave evidence, and he gave it very badly. The person who tied him up


in knots was not the eloquent Mr. McKenna or the brilliant Lord Keynes but Mr. Ernest Bevin. I believe that to many people in his country that was the first time the name of Mr. Ernest Bevin achieved its real mark of significance.

Mr. Douglas Jay: indicated assent

Sir H. d'Avigdor-Goldsmid: The right hon. Member agrees with me on that. Despite that gloomy precedent, Sir Leslie came and gave evidence and laid on a full programme for the Committee which was presided over by the hon. Member for Poplar (Mr. Mikardo), who I imagine could not be expected to give much quarter to a hostile witness. Sir Leslie gave evidence with extreme generosity of time, with complete frankness and with very good feeling. I am sure that whatever secrets the Committee expected to extract from the bank, and whatever ideas it may have started with, it discovered nothing discreditable. More than that, however, certain facts were brought to light. As the Committee's recommendations were in the main accepted by the Government, I believe that the Committee did a good job. Certainly Sir Leslie was extremely helpful in mending relations between the Bank of England and this House. I hope that the House will not mind those comments, which are not as far from the subject of this debate as estuarial pollution.
It was a great revelation to the Committee to know that the accounts of the Bank of England were never seen in the Treasury and that the Chancellor of the Exchequer never saw them. But of course there was one branch of government that saw them. That was Somerset House. There seems something peculiarly British, of which one need not be ashamed, in the fact that Somerset House should have access to information which was not available to either the Treasury or the Chancellor of the Exchequer.
I now turn to the subject of this debate. The trouble from which we are suffering is the so-called Euro-currency which the right hon. Member for Leeds, East (Mr. Healey) characterised as foot-loose. He put a figure of 100,000 million dollars—100 billion dollars—on this. But what is this currency? These are dollars that are neither invested nor spent. Where do

they arise? I am rather surprised that no one has touched on this aspect. They are purely fortuitous. In the first place they began, I believe, by an action in the United States, a policy of investing abroad, at a time when United States dollars were unconvertible into any medium of exchange. They have been greatly added to by the acquisitions of the oil-producing States of the Persian Gulf, the OPEC countries.
There is a very good article in a paper called Petroleum Press Service this month, "Questions for the Billionaires". to which I shall refer later. I want to refer first to the extent of this problem, the 100 billion dollars. In the Financial Times today we read that the French authorities have been forced to acquire 5 billion unwanted unconvertible dollars. I have no doubt that the Germans have a great deal more than that. They rise, in the first place, from American investment policies. To quote the Petroleum Press Service, the revenue of the OPEC countries went up from 4½ billion dollars in 1966 to 15 billion dollars in 1972 and are estimated to be no less than 56 billion dollars in 1980. So we are really dealing with something which could double the amount of dollars in circulation.
The smooth working of international commercial relations requires that Governments should play the game according to the rules. There seems no reason to suppose that Arab Governments are aware of any rules in these matters; and Governments which accumulate large financial reserves have it in their power to harm the economy of others. That is a platitude. But the obvious way to obviate the trend would be for the OPEC Governments to spend their revenues and not allow them to pile up in large financial reserves.
How far is this feasible? There are limits to the amount of money that can be spent on the population.

Mr. Hugh Fraser: Even estuarial population.

Sir H. d'Avigdor-Goldsmid: Yes, even estuarial. There are limits imposed by lack of education, lack of know-how and numbers in the Gulf countries. It is a problem for them to spend their money. These countries are adding to their funds all the time. The right hon. Member for


Leeds, East spoke of this currency as being foot-loose and he also mentioned the possibility that one should be able to trace the origin of funds. One would have thought oil funds could be more easily traced than most, not because they leave behind a smear but because there are definite channels through which they will be paid. I would have thought it was not beyond man's inventive powers to devise a method of dealing with these funds in the hands of recipients so that unless they were spent, and spent as the recipients desired to spend them—because one should not inhibit their expenditure—or invested within a certain time, they should be dropped.

Mr. Jay: Is not one obvious solution to lend some of these funds to the World Bank, which could then lend them in a carefully managed way to less-developed countries which would use them? That has been done to some extent already.

Sir H. d'Avigdor-Goldsmid: I agree with that. I used the word "invested". There should be an Arab Development Bank. A large proportion of these funds is circulating in this narrow market and causing great destruction. The amount is increasing, and I echo the view of the hon. Member for West Lothian that at this stage, when the heat is not on, we should put our heads together to deal with the difficulty. This is an international problem and not merely one for us. It is a problem for all Western nations. It is also a problem for the United States.
The hon. Member for West Lothian is not here at the moment, but he seemed unduly suspicious of the activities of international companies. I must tell him that these companies are run on businesslike lines. They do not have enormous bank balances. They have enough funds in the various countries in which they operate to run their companies. Therefore, if it is a question of moving funds, the amounts moved from one place to another are only marginal. They do not move a whole factory because there is a change in the rate.
Let me give the House an indication of how little defended we are to deal with these movements. According to the Union Corporation, the total gold holding of the Bank of England is down to 100 million fine ounces, which even at the

current price of gold comes to about 1,750 million dollars or £700 million, but we are talking of countries which are to have a revenue of 56,000 million dollars by 1980. The United States has a huge gold holding, but it is a negative one. It has more gold earmarked than it holds. It has the expense of guarding a lot of gold in Fort Knox which belongs to other people. The United States is in deficit.
There are no defences to this enormous, uncovenanted movement, because the Euro-dollar was originally of modest growth. It is only since the OPEC nations have been accumulating these large amounts that the problem has become so acute. It is becoming more acute all the time, and I echo the words of the hon. Member for West Lothian that this is the time to put our house in order.
We have been discussing the recent negotiations and it seems to me that it is rather like playing in a bridge tournament on a luxury liner. The game is all nice and warm. When it is over the score is added up and it is found that someone has gone up and someone has gone down; somebody has done better and somebody has done worse. Everyone is happy, but then some water starts coming in. The band next door, which had been playing the "Merry Widow" waltz changes to "Nearer my God to Thee" and the name on the hull of the liner is "Titanic".
These are conditions which one can see and foresee. They are conditions about which, in co-operation with others, we are in a position to do something. The last thing we want to do is to enter into a slanging competition with the United States. I cannot follow the hon. Member for West Lothian in what he said. For us to quarrel with the United States would be like a man getting drunk to celebrate the fact that he has been cut out of his father's will.
We have working co-operation in Europe and with the United States. As my right hon. Friend the Member for Barnet (Mr. Maudling) said, the system has worked. Let us now try to see whether we can make it work even more efficiently and prepare ourselves for the stresses and storms which must be on the way.

6.56 p.m.

Mr. Piers Dixon: My right hon. Friend the Chancellor of the Exchequer has firmly stated on a number


of occasions that his policy is one of fixed but adjustable rates. The trouble with such a policy is that it is a speculators' paradise. It is a case of "Heads I win, tails you lose", and therefore I must part company from my right hon. Friend on that matter.
Ideally, one should have a system of permanently floating rates.

Mr. Ridley: Hear, Hear.

Mr. Dixon: I am pleased for my hon. Friend's sake that he is able to give me some encouragement on that, but I part company from him too. There are many problems. My hon. Friend dismisses the commercial problems, but they are very real. Businessmen have difficulties in contracting, and for their sake it is essential to have some sort of fixed rate. Particularly in the context of the common agricultural policy, it must be clear to hon. Members on both sides of the House that some system of fixed rates is essential if the Common Market is to work at all.
I am driven to the solution which has already been deployed by my right hon. Friend the Member for Barnet (Mr. Maudling). He advocated a two-tier system. There could be a floating sterling rate for financial transactions and a fixed rate for commercial ones. I know that there are problems of policing currencies, but in this country at any rate the Bank of England has shown great sophistication and I do not foresee any severe problem in keeping the two types of transaction separate.
I look forward to the day when not only in this country but in every other civilised country there is a floating rate for financial transactions and a fixed rate for commercial dealings. It is essential to get away from the situation in which we in common with other countries are at the mercy of "hot" money. Businessmen are entitled to be prudent and to place their money in those countries where they think it will be safest.
To my mind it is essential that every country should have control over its own money supply. I am not a monetarist but I recognise that the many problems that we have of inflation must to a degree depend upon the extent to which a Government can control the money supply of their own country.
There are many factors which cause money supply to go up faster or slower. The two principal ones are excessive Government expenditure without corresponding increases in taxation, and hot money from abroad. A two-tier system of exchange rates would go a long way to eliminate the second of those problems and would enable the Government to control our money supply. It is principally on this basis that I advocate some system of two-tier rates in any future exchange policy.

7.0 p.m.

Mr. Michael Meacher: The hon. Member for Truro (Mr. Dixon) put forward the two-tier solution based on floating rates on capital account and fixed rates on current account. Although this has a superficial attraction in the context of a return to the snake in the tunnel experiment of reduced parity deviations run on a central point, there would still be the difficulty that if there were any marked variation in inflation or growth rates such a system would still not be very much more satisfactory than is the present system. However, I agree that the two-tier system would get over the major problem of compounding capital movements, particularly where there is a reserve currency rôle.
What makes the international monetary situation so grave is that three critical issues confront the country more or less simultaneously. The first is that at present there is strong pressure on us, particularly from France, to re-peg the pound at about the same time as the continuing deterioration in the balance of current account makes a capital flight out of sterling before the end of this year very likely, with unsustainable pressures on any reasonable selective parity if we re-peg the pound beforehand.
Secondly, at a time when Britain's exports badly need improvement there is the problem of substantial trade protectionist sentiments in the United States, which perhaps this time may carry the day and which certainly would have a serious impact on British trade.
Thirdly, there is the cloud, perhaps no bigger than a man's hand, of renewed pressure for closer monetary integration in Europe, which is fundamentally


impracticable without much more far-reaching political and economic changes than have so far been envisaged, at least publicly.
Perhaps the most immediate objective is to dissuade President Nixon from imposing unreasonable restrictions in his forthcoming Trade Bill. Trading restrictions occur on all sides and it should prove possible to diminish them by mutual concessions. But the key to the problem will hinge on the capacity to construct a system in which the United States has some freedom to devalue much more easily at its discretion with the same obligation to meet deficits in terms of non-dollar users as have other countries. There can be little stability in the system while the most powerful country in the international monetary fund cannot unilaterally, even now, without major convulsions change its own parity in relation to other currencies.
There are several solutions to the problem even assuming that gold is ruled out simply because the Group of Ten do not want it as the key to the system. There can be little doubt that the most satisfactory system would be for the dollar to be fully demonetised internationally instead of the dollar being retained as a reserve asset. This could happen only if the existing dollar balances were transformed into some new international monetary unit quite separate from the domestic currency within the United States. This at least would enable the United States to vary the dollar much more flexibly in terms of this new unit in exactly the same way as do other countries.
If it were felt that this new numéraire required some backing, it would be far more satisfactory if this were provided, not by gold, but by an agreed set of commodities, as some UNCTAD economists have put forward. This would spread the source of moneymaking power much more widely among the commodity producers of the world and would tend to generate the maximum attainable rate of growth in the world economy and in conditions of more stable prices, at least for basic materials. That should be our objective, for it is the supply of food and basic materials which limits the rate of growth of world industrial production and not, as now, the rate

of growth of effective demand in the advanced countries which determines the growth of demand and production of primary commodities.
Unfortunately, such a desirable reform of the international monetary system which, like all convoys, tends to move at the pace of the slowest member or the least enlightened central banker, is unlikely to emerge. In practical terms, the most that can be hoped for out of the present situation is a significant extension of the SDR scheme.
I fully support the efforts made to achieve this by the Chancellor of the Exchequer at the September 1971 IMF meeting, although as my right hon. Friend the Member for Leeds, East (Mr. Healey) said, I am disappointed that it has not been followed up more forcibly since that time. The best early solution to the problem referred to by the hon. Member for Walsall, South (Sir H. d'AvigdorGoldsmid), namely the vast dollar overhang of 60 billion dollars short-term United States liability, is surely the Italian one that they should be traded in as a swap for expanded SDR facilities.
The most worrying issue for Britain at present is not so much the continuing opposition to an ultimate monetary reserve which has no intrinsic value. It is rather the political pressure within the EEC to move towards a collective float against the dollar, on the widely felt grounds that the possession of some European reserve currency is in some sense a necessary part of world-power status. This would not only drag up the pound against the dollar and thus do away with some of the advantage of the 10 per cent. devaluation of a year ago but, much more seriously, it would tie the pound to the stronger European currencies, with results that are bound to reproduce quickly and even more drastically the debacle of a year ago.
But the effect on the pound of an attempt to achieve a common European reserve currency would be even worse since the EEC would have to establish such a marked collective over-valuation against the dollar and other currencies that it could run a deficit against the rest of the world for a year or two years, or perhaps for a decade or two. There would appear to be no other way by which a joint European unit could find


its way in substantial amounts into the reserves of other countries. Yet the impact on Britain of such a change, as long as Britain remains inside the EEC, would be extremely serious in that Britain, perhaps more than any other advanced industrial country, has already suffered the chronic disadvantage of an over-valued currency.
Whether these European pressures develop now or within the next few years—and they are certain to develop sooner rather than later as a result of the Paris communiqué of last year—they must either force Britain in a limited sense to exit from the European experiment or alternatively they must force much bigger political changes than have so far been discussed. I believe that the right hon. Member for Barnet (Mr. Maudling) and the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) were absolutely right to insist that that would be the result.
A semi-immutable pattern of exchange rates is possible only if there is a close approach to political union, which demands a federal treasury a federal central bank and presumably also a federal parliament, because surely, without a very high degree of centralisation, there is no adequate means of preventing inflation in one member country from advancing at a much more rapid rate than in another. At least that has been our historical experience in recent years, and very forcibly so.
The crucial point that has been lacking from the Government's case as it has been stated today, therefore, is what resolution it envisages for this fundamental dilemma. I make no apology for going over this point, which has indeed been expressed before, and rightly so. It seems necessary for the Government either to make it clear that there is a tacit commitment to a much higher level than has been achieved of political and economic centralisation or, if not, to make it clear how a series of fixed but movable parity adjustments for sterling would be avoided that would otherwise effectively spell out successive devaluations.
At present there is no such assurance, and it can be seen why. There is a real problem as long as sterling retains a reserve-currency role, where, again, the

Government's position is not clear. What proposals do the Government have for the protection of the British balance of payments against movements of hot pounds in the kind of run on sterling that is virtually inevitable in this country before the end of this year if the pound is re-pegged? It is all very well to erect more formidable exchange controls within the EEC against vast shifts of hot dollars, but how are the Government to prevent a haemorrhage of hot pounds within the EEC in the all-too-likely event of a United Kingdom trade crisis in the near future?
In view of the German precedent over the past month, it is very difficult to have confidence that exchange controls will be imposed in such a situation sufficiently rapidly and firmly to prevent repeated drains on sterling. But until the Government can give some plausible conclusions as to how to resolve these twin dilemmas, their present commitment to a series of monetary objectives that are either inconsistent or in some cases plainly illusory can at the present time command neither confidence nor wholehearted respect.

7.13 p.m.

Mr. Peter Tapsell: Hon. Members on both sides of the House have been very ready to criticise other countries for the present worrying state of the international monetary situation. The hon. Member for West Lothian (Mr. Dal-yell) thought that the Americans were too chauvinistic. The hon. Member for Ashton-under-Lyne (Mr. Sheldon) thought that the Japanese were too ruthless. My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) thought that the Arabs were too rich. To listen to their speeches it might be thought that we in Britain were really the one good boy and everybody else was out of step. But the curious thing I find as I travel around the world is that the one thing about the monetary situation on which the Americans, the Japanese and the Arabs agree is that Britain has grossly mishandled sterling since the war and is a prime contributor to the present situation. So we cannot suppose that this problem will be solved by blaming other people. I very much echo what my right hon. Friend the Member for Barnet (Mr. Maudling) said earlier in the debate when he pointed out that we


would always have a problem in the international monetary field and that anybody who looked for simplistic and complete solutions to that problem was likely to be disappointed.
Inevitably we must oversimplify when dealing with those complicated economic matters, and I am now going to do exactly that. I am going to say that I believe the root cause of inflation throughout the world can be summed up in a single striking phrase which Adlai Stevenson once used in a quite different context—"the revolution of rising expectations". Hundreds of millions of ordinary people in almost every part of the world are shaking off the fatalism and mysticism with which they traditionally defended themselves from poverty. Increasingly they are coming to expect and demand the material prosperity which was formerly the preserve of the privileged few. Nowhere is this more true than in Asia, the continent towards which the balance of financial power is steadily moving and is likely to continue to move. It has become the first preoccupation of Governments everywhere to seek to satisfy this insatiable new demand for a living standard which will rise each year.
Inevitably in this situation the production by Governments of paper money tends to exceed the production by people of real goods and services. The result is world-wide inflation and an unstable international monetary situation, which makes the fixed parity system agreed at Bretton Woods more and more difficult to operate as each country strives, outside its election year, to inflate a little more slowly than its neighbours. In this context, the greatest single technical contribution we could make to our own economic competitiveness would be to return to septennial Parliaments. This worldwide revolution of rising expectations sets the stage for today's debate on the international monetary situation, which has, I believe, replaced the danger of war as the greatest single threat facing the world at this moment.
On this stage there are three major dramas to be enacted and, it is hoped, resolved: the huge present and prospective surplus of Japan; the even bigger prospective surpluses of the Middle East

oil producers; and the 70 billion Eurodollars already washing around the world and threatening the currencies, the economies and so the standard of living of every country in turn.
I would submit that the first essential for clear thinking on this subject is to rid one's mind of the superficial cant about speculators, Swiss gnomes, greedy oil sheikhs, fanatical Japanese workers and the whole outdated galère of Left-wing demonology. No doubt such gentlemen exist, but they are only a very peripheral aspect of this major international problem. The essence of the problem, the very thing which makes it so intractable, is that it is a drama, as in a good Agatha Christie play, where there are no easily identifiable dyed-in-the-wool villains but plenty of potential and fairly innocent victims.
Of course, the surplus countries have their obligations, but so do the deficit countries, and I am profoundly thankful that we in Britain are at least shaping up to our obligations in this respect, with the Counter-Inflation Bill.
Many hard things have been said about Japan in this debate, and I accept, of course, that the very big Japanese surplus poses a serious problem and that the yen is a key factor in the international monetary situation. That goes without saying. But I think it is all too easy to blame the Japanese and very unwise of us not to make the effort to understand the way they see the problem. We must remember the special nature of the Japanese economy. It is really different from all the other economies of the world. It is an extremely efficient processing economy which depends very largely on huge imports of raw materials, which are then processed with the greatest efficiency and exported all round the world.
Precisely because of that fact, those who lay great emphasis on the need for a revaluation of the yen may be making a fundamental mistake. One effect of a revaluation of the yen is to cheapen the cost of all the raw materials which Japan buys and then processes. Each time the yen is revalued it is possible and, as the Minister of Finance of Japan said to me last month, even probable that the effect over the short term will be merely to increase the Japanese surplus. So, as in


other spheres, I do not have too much faith in the capacity to solve this problem by purely monetary means.
It is also important to try to look at the situation in the way that the ordinary Japanese does. To the ordinary Japanese man working extremely hard, all this talk about the strength of the yen and about the huge Japanese surplus is meaningless. Like his English counterpart, he is interested only in what there is in it for him. The truth is that to the ordinary Japanese working man his housing and his welfare benefits are significantly poorer than they are for people in this country.
The great mass of the Japanese have not yet benefited from their huge surpluses, but they suffer from a revaluation. They have a real sense of being hemmed in and beaten down by a conspiracy of rich industrial nations of European stock. It is very important that we should not again make the mistake with Japan that was made in the 1930s. There is a real danger that if Europe and North America appeared to them to gang up against Japan we could be repeating the blunders that were committed in the early 1930s, and so might they. We have to be very careful in handling this problem. It could have serious long-term political and diplomatic consequences.
The Nixon shock method of economic diplomacy carries with it very great potential political dangers. The Japanese leaders whom I have had a chance to meet from time to time in the past year or two are very much aware of international opinion and of the need to change course. One has only to look at the recent Japanese budget to see that great efforts are being made to switch resources from industrial investment to social welfare, to switch exports to home consumption, to facilitate and encourage imports and to increase aid to underdeveloped parts of the world.

Mr. Sheldon: In the hon. Gentleman's eulogy of the Japanese of the 1930s, has he taken into account their co-prosperity objectives which were an integral part of Japanese industrial policy at the time and which led to their involvement in the last war? What is more, bearing in mind the hon. Gentleman's eulogy of the Japaneses as they are today, is he aware that some of those policies appear to have

survived and that, in the words of the Economist, we may be heading for a trade war?

Mr. Tapsell: The hon. Gentleman's description of me eulogising the Japanese policies of the 1930s is so wildly absurd that I shall not even bother to reply to it. I was making the serious point that the Japanese felt economically and militarily isolated in the 1930s and that that led to terrible trouble for the world. We must learn from that lesson and not treat the Japanese in such a way that they feel isolated and browbeaten again.
It is precisely because I wish to avoid the danger of a trade war, which is all too real at present and which in my view would not be restricted to the Japanese but would spread through the whole world and result in a world recession, that I want to see a serious and intelligent diplomatic approach. I am not saying that we should not talk frankly in private to the Japanese leaders. I am sure that that is essential and that my right hon. Friend the Prime Minister did so in Tokyo recently. I am not saying that we should adopt a wait-and-see attitude. But I think we should give the Japanese leaders adequate time to co-operate, that we should appreciate that they have real problems that they are a democracy and that they have an electorate whom they have to satisfy, just as we have.
I turn from the Japanese to another category of people who have been abused in the debate. I refer of course to the Middle Eastern oil producers. Here again if the matter is to be handled intelligently we have to make an effort to see the situation from their point of view. It is not their fault that they have oil. They are living in an area where for centuries there has been some of the most grinding poverty anywhere in the world. The Western world, including Japan, desperately needs their oil and our own industry and the prosperity of our people depend on that oil to a considerable extent. They sell us that oil on a satisfactory two-way commercial basis. Naturally they bargain, just as Opposition Members want their trade unions to bargain, for the best possible terms. But the idea that the Middle Eastern oil-producing countries are culpable because at last they are in a position to raise their standard of living and


have substantial revenues seems to me to be extraordinarily insular and unsophisticated.
The problem is that their oil revenues are going up at such an extraordinary pace that it presents tremendous technical difficulties in terms of employing them usefully. The leaders of Arab countries are well aware of these problems. The Middle Eastern oil producers will have an annual income of more than 50 billion dollars by 1980. There is no possible way of their employing these funds in their own countries, although the growth of local money markets in places like Singapore, Hong Kong, Beirut and Kuwait will make some contribution. But those markets depend on political stability and many of the locals in those parts of the world are not convinced that political stability in their areas is permanent. Even so there will be these enormous surpluses which cannot be employed locally——

Mr. Ridley: Is there any price elasticity in oil? If these huge sums are to be asked, we shall have to find ways of substituting for oil. Does not my hon. Friend believe that it may not be quite as bad as he is saying?

Mr. Tapsell: That may be so, but the other argument which naturally the Arabs themselves are examining carefully is whether they should not keep more of the oil in the ground which would have the opposite effect and push up the price still higher.
The significant fact is that the United States is becoming a very big importer of oil. The Soviet Union is about to become an oil importer. The likelihood is that the price of oil will continue to rise and oil will continue to be in great demand. However, I do not want to get sidetracked into a separate discussion, however interesting, of the future financing of the oil industry. I am concerned with the narrower point of the effect of these enormous surpluses on the international monetary situation as they build up in the next 10 or 20 years.
I suggest that those hon. Members who have suggested that the oil-producing countries have been a major contributor to the recent monetary crisis are being less than fair. As my right hon. Friend the Chancellor of the Exchequer said,

it is very difficult to trace where the money comes from, which money moves where, or who is responsible for this monetary crisis. The fact is that not only have most of the Arab Governments, central banks and major Arab institutions behaved very responsibly in international finance over the years; most of them have made massive losses out of the recent international monetary crisis. In their terms, the simultaneous devaluation of the dollar and of sterling has been impossible for them to avoid. There is probably not a single Arab bank and certainly not a single Arab country which has not made huge overall losses as a result of this recent international crisis. It is not right for some hon. Gentlemen to suggest that the Middle Eastern oil producers have caused this crisis. That does not mean that there is not a great problem about their surpluses for the future.
I should like to consider possible ways in which international co-operation can work towards helping to solve this problem. Clearly, as a country's reserves continue to climb out of phase with the international system as a whole, it has an obligation to adjust its currency accordingly. But Middle Eastern oil-producing countries cannot be expected to continue to revalue their currencies indefinitely, because of the internal effect on their populations. They can contribute to the development of other countries and keep their own reserves stable by investing in industrial development on a world-wide scale and investing firmly in long-dated bonds overseas which the Governments of the countries concerned can use to develop those countries. This is as much in the interests of the Middle Eastern countries as everyone else's. I believe that many of their more responsible leaders see that.
It also gives an added urgency to the need for a fair settlement of the Arab-Israeli conflict towards which one hopes that the vast wealth of some Arab countries could be a helpful contributor.

Mr. Stanley R. McMaster: It is all very well in theory to suggest that the Arab countries should invest in the world, particularly in long-dated bonds, but whether they do so surely depends on many individual decisions. It depends on an adequate


profit return. It depends basically on confidence in the currencies of the countries in which they might wish to invest. It seems little use suggesting that the solution of the world's financial problem is for Arab countries or Japan to invest abroad. We cannot order or invite them to do so. All we can do is to ensure that our currencies are stable. Is this in agreement with what my hon. Friend is saying?

Mr. Tapsell: There is much force in what my hon. Friend has said, but countries which have enormous surpluses which they cannot employ at home must find some outlet for their money. It may be better for them to invest in bonds which will be devalued every five years or so than not to employ their money at all. There is the additional problem that the surpluses in the Middle East will be so great that if used solely for direct investment they will buy up the whole of industry in Western Europe and North America. Clearly, the countries in those areas will not want that to happen, so a great deal of thought must be given to the problem. The worst way to approach the problem is in a mood of criticism of Middle Eastern countries. They recognise the problem, to which the Committee of Twenty under the chairmanship of Mr. Jeremy Morse will no doubt be giving a great deal of attention.
The third sphere in which we have a serious monetary problem is the Eurodollar market. This latest crisis underlines again the necessity for a greater degree of intergovernmental control of the Eurodollar market. We in the United Kingdom have forbidden the borrowing of Eurodollars for less than five years. The Germans insist on the borrower making an equivalent deposit in deutschemarks. However, recently, speculators have been prepared to borrow deutschemarks in pursuit of a certain profit.
A possible way of regulating the market is the imposition of negative rates of interest on funds which move more frequently than is thought suitable. Here again, a lot of thought must be given to the exact way in which it is handled. However, it is certain that there will have to be a greater degree of intergovernmental control of the Eurodollar market

than in the past. Of course, we must he careful not to throw out the baby with the bath-water because, for all the problems that it poses, the Eurodollar market is an immensely valuable new financial mechanism doing a great deal of good work in the financing of industrial development all over the world.
Speaking in this House on 24th January, before this latest monetary crisis broke upon us, I said:
we should look at the possibility of a two-tier exchange rate structure which would separate our capital and current accounts."—[OFFICIAL REPORT, 24th January, 1973; Vol. 849, c. 535.]
I repeat that request to my right hon. and hon. Friends with an even greater sense of urgency today.
The basic problem which has so far defied solution is how to defend exchange rates from free capital movements. On the one hand, a reasonable stability of exchange rates is desirable in the interests of international trade. On the other hand, freedom of capital movement is desirable if international investment is to be efficient. Yet every sterling crisis and every international monetary crisis in recent years has started with a flight of capital from one currency to another. The best way of reconciling these conflicting needs would seem to be a universal extension of a two-tier exchange system. There should be fixed, though adjustable, parities for current transactions and floating rates reflecting the play of market forces for capital transactions: a fixed commercial pound and a floating financial pound.
What I have just said in no way conflicts with the announcement made earlier today by my right hon. Friend the Chancellor of the Exchequer about a study by EEC countries of a joint float. I think that this would fit in with it very well indeed.
Last week in the House and again today my right hon. Friend rightly said that a two-tier exchange structure would not have averted the recent crisis. But I put it to him that a two-tier mechanism could be a blessed comfort to us in the next crisis, whether it is joint with the other eight countries of the EEC or unilaterally operated by us.

7.37 p.m.

Sir Brandon Rhys Williams: I am particularly glad to have heard the whole of this important debate today. I should apologise to the right hon. Member for Stepney (Mr. Shore), who I understand will be winding up for the Opposition, if I am unable to stay to the end of the debate.
I am the only Member of this House who is also a member of the Economic Affairs Committee of the European Parliament, and it was invaluable for me to hear the series of excellent speeches which have been made by right hon. and hon. Members on both sides of the House.
There are two reasons for optimism after the recent crisis. One is that the dollar is becoming an ordinary currency and no longer has the rather spurious chosen virgin status that it had under the Bretton Woods Agreement. The other is that the general structure of exchange rates is becoming more realistic than in 1970, although there are still significant changes to come.
The Japanese economy is in substantial surplus and is likely to remain so in the immediately foreseeable future. American capital exports, which have contributed a great deal to our difficulties and the capital markets, are still overhung by huge masses of mobile expatriate American dollars which are capable of causing havoc at any time, as they have done in recent weeks. So the balance which has been achieved by the recent settlement is unstable and we cannot hope to remain as we are for very long.
My right hon. Friend the Chancellor of the Exchequer referred to the reform of the world monetary system which is being studied by the Morse Committee. I am sure that all right hon. and hon. Members wish Jeremy Morse well in his labours. We know that Morse is trying to find a new world numéraire to replace the dollar and also to take the place of gold. I am bound to express some scepticism as to whether SDRs in the long run will fill the need.
My scepticism perhaps has the very good reason the Chancellor of the Exchequer and also Mr. Giscard d'Estaing virtually committed themselves at the September meeting of the International

Monetary Fund to the view that in future SDRs should take account of the needs of the Third World. That is probably an essential commitment, but it does not recommend SDRs as a replacement for gold in the long run.
It might be advisable if we tried to find some world numéraire other than the SDR so that SDRs and other currencies could be expressed in terms of that. I fear that with the passage of time, the SDRs are likely to become more and more common currency and to depreciate. The reformed IMF might well adopt the European Payments Union formula under which the numéraire was automatically linked to whichever currency was proving to be the most stable at the time. This may be the nearest we can come to a replacement for gold as numéraire for the world system.
My right hon. Friend also spoke about the progress towards European monetary and economic union. On the continent the crisis is giving rise to a quite different line of thinking from that in this country, to judge from the speeches I heard in the economic debate in Luxembourg last Thursday. Members of Parliament of all shades of opinion tended to express the view that as a result of the crisis we must advance with greater speed towards European monetary union and that we must hasten to narrow the margins of fluctuation either side of the fixed parities in foreign exchange markets, which I thought was a particularly dubious recommendation. There was also mounting pressure for the fixing of the sterling parity at the earliest possible date.
On the other hand, in Britain the crisis has tended to make for greater scepticism about union and extreme caution about fixing the sterling exchange rate or even indicating the date when we might fix the rate again.
In recent years there has been a very great change in the outlook of British orthodox financial opinion about the advisability of sterling remaining on the floating rate. I can recall the horror expressed 20 years ago when Wilfred King published two articles in The Banker recommending that we might consider floating rates. At that time, I do not think that he had many friends in orthodox financial circles nor, indeed, in the Treasury.
My third reason for optimism at present follows on from our relationship with the other countries of the Community, namely, the "fixed but adjustable" compromise reached at the Summit Conference last September. Now we must follow up the Summit Agreement.
First we must look at the institutional development planned for the immediate future, because before 1st April it is intended to set up the European Fund for Monetary Co-operation which was envisaged in the Werner proposals. The Draft Memorandum and Articles prepared by the Commission has been made available to members of the Economic Affairs Committee, but I do not know whether hon. Members have had the opportunity to see this. It contains no surprises. I was disappointed when I read it because I thought it was so rudimentary as scarcely to constitute a new financial institution at all.
Some people see the European Fund as a gadget which would help central banks in smoothing operations. Others regard it as yet another lunch club for central bankers and do not expect anything very much to come of it. I prefer the suggestion that it might turn, at any rate in the immediate future, into a study group, drawing on the Bank for International Settlements for its routine banking services and possibly on OECD for technical studies, with particular reference to the structure of parities and trends in the European economy.
The European Fund should make itself responsible for building up what has been called a bundle of indicators to help national financial authorities to decide on the timing and extent of future parity changes, implementing the fixed but adjustable formula, and, I hope, laying emphasis on the adjustable end of the compromise rather than on the fixed side of it.
As to this new institution, I hope that the Fund will soon have a real fund which will enable it to intervene effectively in currency markets, and a board of real authority so that it can function largely independently of the Council of Ministers. If this is not the case, judging from one's experience, it will hardly be able to function at all.
It should also seek to have the closest possible relations with what one might call outer Europe, particularly Switzerland, Austria and Sweden, which countries are very anxious to continue to cooperate with the Community as closely as possible in monetary affairs. In addition, the Fund should seek the closest relations with the American authorities and the IMF. It would be disastrous if this European institution were to be a purely inward-looking organisation.
As to other forms of collective European action, I welcome the Chancellor's announcement of the study of the possibility of a joint float. I have long thought that the European cluster of currencies would probably have wider variations in exchange rates with the other major currencies such as the yen and the dollar than it would have within itself as progress was made towards economic union. The precide mechanism for a joint float therefore requires the closest attention.
1 hope there will be a fuller analysis of the two-tier markets. It has been a matter of great interest to me to hear so many well-informed speakers this afternoon emphasising their belief that this is the way ahead. I am strongly inclined to share that view.
It may be worth asking ourselves why there is this pressure from the other countries of the Community for a return to a fixed rate for sterling. Partly, of course, it is because of the greater ease of operation of the common agricultural policy.
Last month we agreed the notional rate for sterling for exchanges of agricultural goods which became known as the representative rate. It is unfortunate that events have already overtaken the representative rate and made it rather an artificial one. But I think we acted correctly in agreeing that, for purposes of trade in agricultural products, we should have a notional rate for sterling even while the float was continuing.
Next we should try to find some means of helping small traders who find floating exchange rates confusing or embarrassing and who need to have a simpler system in order to carry on their transactions. If we adopt the "fixed but adjustable" formula, there will be an obvious need for a dependable futures market for transactions which one might describe as


being for the current account rather than the capital account.
British financial institutions should be encouraged, or even enabled by official intervention to quote firm forward rates for buyers and sellers of the major currencies for the benefit of those traders who do not care to depend on the free market for such a service and are willing to produce evidence that their needs arise from current transactions.
The Bank of England might be willing to act as the buyer and seller of currencies of last resort for current transactions, that is, the lower tier of the two-tier market, quoting rates on either side of a central parity which would of course be fixed but adjustable in accordance with the compromise formula. If the Bank of England were to offer this service which I envisage need not be obligatory but merely optional, it would be doing for foreign exchange risks only what the Export Credit Guarantee Department has done over many years for payment risks in foreign exchange.
Finally, I would urge the Chancellor to realise that other Community countries would welcome a lead from London, based on our very long experience as a world financial centre, and also making use of the great facilities of the London market, which exist nowhere else in the Community. It is not necessary for us to adopt the attitude, as perhaps we have appeared to do in recent months, of leaving the other Community countries to make the running, while we aim to follow along as best we can.

7.51 p.m.

Mr. Peter Rees: It is a great pleasure and privilege to follow two such eloquent speeches as those of my hon. Friends the Members for Kensington, South (Sir B. Rhys Williams) and Horn-castle (Mr. Tapsell).
In joining this rather select seminar on the international monetary situation, I must disclaim any very close acquaintance with the working of the currency markets. But even a superficial study of the international monetary scene over the last five or 10 years must lead a comparative novice like myself to some general conclusions, which I hope I may offer to the House.
We are now experiencing a break-up of what I would call the Bretton Woods scene. We are faced, therefore, with two major problems and many minor ones. The first, of course, is the creation and regulation of international liquidity, on which my hon. Friend has just touched and which I do not propose to investigate. The second is the question whether we should have fixed or floating exchange rates.
Fixed rates may have been possible in what I have described as the Bretton Woods era, when we had one predominant economy, that of the United States, and the countries of Europe were primarily, indeed overwhelmingly, concerned with restructuring their own economies. I venture to doubt, however, whether it is possible to perpetuate that kind of situation. A system of fixed rates in a sophisticated market is really an attempt to buy short-term stability, at great cost. It is an attempt to limit market prccesses by Government intervention.
I say "at great cost" because, of course, there is first of all the political trauma which, at any rate up to now, appears to have been inseparable from any change by a major power in its exchange rate. We witnessed a hangover from that in today's debate when the right hon. Member for Leeds, East (Mr. Healey) described the floating down of the pound as a defeat.
This of course is an echo of the Labour Government's attitude in 1967——

Dr. John Gilbert: And of the present Prime Minister's.

Mr. Rees: Indeed not. The Prime Minister has never described the floating down of the pound as a defeat. If he did describe the devaluation in 1967 as a defeat, it is because, as I have said on another occasion, all the efforts and expertise, such as they were, and the prestige, if indeed it had any, of the Labour Government, had been bent for three years to maintaining the particular rate of 2·80 dollars to the pound, and they signally failed. I am not blaming them, but this is a statement of fact, so it was right to describe that as a defeat. This Government have not bent their prestige, their expertise or their skill to maintaining any one rate.

Dr. Gilbert: I am following the hon. and learned Member closely. Would he not confirm that the Chancellor of the Exchequer has never yet retracted his view that the proper rate for sterling was 2·60 dollars?

Mr. Rees: I am not over-concerned with the published pronouncements of my right hon. Friend the Chancellor. I am more concerned with the play of market forces. I do not believe that any rate can be, must be or should be sacrosanct. That is ridiculous. That is to misunderstand the currency market. To try to involve national prestige with a rate is a naive, almost puerile, approach to these problems. The hon. Gentleman demonstrates so clearly that he, too, has not worked out of his system this feeling that national prestige is bound up with any particular exchange rate. He, too, demonstrates why it is necessary to get away from fixed exchange rates. The second reason is that there is nearly always a massive expenditure of national reserves in maintaining, beyond a reasonable point, an unrealistic exchange rate.
So one asks oneself, how is it that the Bretton Woods pattern has come to break up? Hon. Members on both sides have identified various factors. There is the Euro-dollar market, which some people have defined as a field for speculators. It always surprises me how hon. Members on the Opposition side, who presumably have a great deal of sophistication in these matters, call the movements of funds by companies, which are bound to protect their balances, "speculation" as though it had some sinister import.
Other people have identified the international corporations. As my hon. Friend the Member for Horncastle has so perceptively observed, hon. Members opposite are always seeking for some sinister, almost hidden, influence which operates against a country's interests in this market. In times past it was the international financier, or the gnomes of Zurich. Now it is the international corporation. As has been observed, in the next generation it will no doubt be the sheikhs of the Persian Gulf. I identify these not as sinister influences but as new factors which we must take into account.
It is perhaps those factors, which we have not sufficiently estimated up to now,

which have compelled the departure from a system of fixed exchange rates. It has been demonstrated very clearly that it is impossible for a country to maintain an overvalued or an undervalued currency. The process is painful and expensive. The truth is that we are still, all of us, trying to operate national monetary systems in an increasingly sophisticated and close-knit world market and it is no longer possible to reproduce the wizardry of Dr. Schacht. It may have been possible in the 1930s but is no longer possible now.
So why go to such lengths to maintain fixed exchange rates, which all the experience of the past 10 years has demonstrated to be an impossible and not very worthwhile exercise? My right hon. Friend the Member for Barnet (Mr. Maudling), whose great experience in these matters one recognises, identified the distortions which result from movements of capital. I should have thought that that might be an argument for imposing controls on movement of capital—perhaps a two-tier system—but that it is not really an argument against a floating rate.
Then there is the question of the volume of world trade. First there is the technical point, which my hon. Friend the Member for Kensington, South raised, as to how far the forward exchange market can cope with the demands of business in a situation of floating rates. It may have rusted away to some degree with disuse but I hope that if the pound keeps floating it will reacquire its expertise of past years. But recognising that that is not the ultimate solution, what those in the business community are asking is that the Government, rather than they, should carry the risk—in other words, that the Government should carry the exchange risks at a cost to our national reserves, rather than the businessmen involved in the problems of export and import. I do not find that a very compelling reason.
Again, it is suggested that if we move away from a system of fixed rates we shall be encouraging the formation of trading blocs. To me this is not a self-evident proposition. It must be a matter of political judgment and, indeed, of international negotiation and skill.
It has also been suggested that a fixed exchange rate is a kind of economic discipline to which we must submit. But


this is a fallacious approach. The true discipline is produced by the wish to avoid the patent disadvantages of continuing inflation. It is not the movement of the exchange rates but the underlying economic factors which lead to alterations which impose a discipline on our finance Ministers.
Leaving aside these general considerations, there are the considerations peculiar to this country at the moment. I refer particularly to our membership of the Common Market. There is the common agricultural policy. To me this is not an overwhelming factor. Floating rates may make it more difficult to operate this, I recognise, but it cannot be right to perpetuate a faulty monetary system purely to maintain the CAP.
More significant and more long-term is the objective which we must set ourselves to harmonise, and eventually unify, the currencies of the Common Market. The Werner Report was a little in advance of its time and so were the objectives set by the Finance Ministers of the Common Market. My right hon. Friend the Member for Barnet has stressed the institutional difficulties and the mechanical adjustments we must attempt before we can possibly have a common European currency. I would stress that we must go a great deal further in harmonising our economic and fiscal policies before we can hope to achieve a unified currency in the Common Market.
That is not to say that it is not an objective that we must set ourselves. Indeed, if the Common Market is to achieve real economic substance and unity, we must aim for a unified currency. But so, ultimately, must we aim for some kind of world order and currency. We cannot attempt to build a common currency until we have laid the fiscal and economic groundwork.
I welcome and applaud the bold move made by my right hon. Friend the Chanccellor last summer. I hope that he will not be overborne to refix the sterling rate too soon, if at all. The problems facing the present Government are twofold. First, there is the question, as it is described—lapsing into the horrible jargon of these matters—of clean and dirty floating. This is primarily a matter of liberating international trade.
One identifies the particular position of the Japanese not in any critical spirit. One recognises, perhaps, the special factors that have led to their position. But we all recognise that they have operated an unduly restrictive economy which has not enabled other countries to achieve a satisfactory balance with them. I put it no higher than that.
But this exemplifies the problem, which we must all study in greater depth, which is inseparable from the question of the international monetary situation. Beyond that we may have to investigate the possibility of two-tier markets. In that connection I touch on our exchange control regulations and make a special plea to my hon. Friend the Minister of State to take a further and closer look at them. They are an unattractive aftermath of the war which we have endured for too long. We have endured them because first, until recently they did not preclude the export of capital to the sterling area but with the contraction of the sterling area they have become extremely onerous. Secondly, they have been administered in a reasonable spirit by the Bank of England, to which I pay tribute. But they are a fundamental restriction on liberties that we should all enjoy. Beyond that, they have the practical disadvantage that they positively discourage people from bringing their capital into Britain because of the difficulty of re-exporting it. So without going further into that question and without expecting a very illuminating reply from my hon. Friend, I hope that he will bear in mind my comments and take the opportunity of the next months to have a further look at our Exchange Control Act and the way it is implemented.
In conclusion, I think that my right hon. Friend the Chancellor was absolutely right to float the pound last summer. I hope that he will not be over-pressed to fix the rate again, certainly not in the next year or so. I hope that his example will encourage other Finance Ministers to take the same step, because ultimately it is the sanest way in which to operate our national currencies.

8.3 p.m.

Mr. Peter Shore: This debate is on a motion that we adjourn rather than on a motion tabled by either the Government or the Opposition. When


we first approached the debate I confess that I had some doubts about whether it would be sufficiently sharply focussed to make a worthwhile contribution to examining the current international monetary situation and the problems that have been canvassed from both sides of the House.
During the last few hours, I have concluded that the debate has been very worthwhile, perhaps simply because we have not been debating a motion which too sharply focused our minds. Right hon. and hon. Members on both sides of the House, including the right hon. Member for Barnet (Mr. Maudling), with his great experience, the hon. Member for Cirencester and Tewkesbury (Mr. Ridley) and some of my hon. Friends, notably my hon. Friend the Member for West Lothian (Mr. Dalyell) have opened their minds in a relaxed way in speaking about these problems more frankly, perhaps, and more interestingly than they would have done when arguing the straight pros and cons on a particular motion.
Two quite strong currents of opinion have emerged which I doubt would have been found had this debate taken place a year or two ago. One current is obviously the movement of opinion, on both sides of the House, in favour of floating the pound. We know that people hedge their approval of the present floating of the pound with various reservations. Nevertheless, there is a general sense, which may be misplaced, of some satisfaction at the floating. Not that the Chancellor has chosen to float. That would be a slightly absurd tribute to pay to the right hon. Gentleman. The hon. and learned Member for Dover (Mr. Peter Rees) paid him that tribute but, as we all know, the Chancellor had no choice in the matter. Floating was forced upon him last June, and he gave way to the pressures. Let us get the picture right.

Mr. Peter Rees: I paid the tribute to my right hon. Friend the Chancellor only because it was not a response which the then Chancellor of the Exchequer felt able to make in 1967. Obviously there were two options open to the right hon. Member for Cardiff, South-East (Mr. Callaghan) in 1967. He possibly made the wrong choice. For that reason it is possible to congratulate my right hon. Friend.

Mr. Shore: These things are arguable. But in the last five or six years we have moved into a rather different international background of behaviour in the matter of parities and currencies. What may have been possible at one period may not have been possible at another. The speeches today have revealed a greater receptivity to not only the fact of floating but also the idea of continuing to float. This would not have been found in any previous year had we had such a debate.
The other current opinion I have noted is the growing sense of concern at the nature of the commitment towards an economic and monetary union in Western Europe. Once again, that has been reflected in the speeches, particularly those from the Government side of the House. I can only welcome this awareness.
I do not make many claims for myself, but I was probably one of the first to become seriously involved in the Werner Report and the discussions and content of that report, which was written only in June 1970. Nevertheless, I have always taken the view that the Werner Report was, as some of its more enthusiastic admirers described it, the second Rome treaty. It carried forward the horizons of European unity and made them incomparably wider than they had been previously. It also opened up new commitments and requirements for the principal countries, some of which are very relevant to this debate.
Before I attempt to draw conclusions from the experience, the great upset, the great upheaval and the great storm that overtook the currency market and, above all, the dollar a fortnight ago, I want to deal with what appear to me to be one or two important features of this most recent upheaval. The first feature is that it is the third great currency storm that has hit the Western world in the last two years. There seems to be no question but that the frequency of occurrence of these great currency upheavals has increased. Whereas after great currency storms in the past one could look forward to substantial periods of peace and relative calm, it appears that we are now entering a period in which such rest is not permitted, and instead of having a long period in which to reflect upon the unpleasant and disturbing experience, we are no sooner out of one crisis than we


are beginning to be concerned about when the next will occur.
Looking back simply over the last two years—and our political memories can go back further than that—we can recall in August 1971 the flight against the dollar leading to the Smithsonian Agreement, and we all remember President Nixon's words, somewhat eulogistic and euphoric, when he described it as the greatest, the most important and the most permanent currency settlement in the history of the world. Yet here we are 14 months after the Smithsonian Agreement with the dollar devalued again and more drastically.
In the interim between these two events which swept the dollar from its old parity there was a storm which afflicted sterling and following that the floating of the pound. We therefore have to take account of the fact that these currency storms—the instability of the system—appear to be increasing greatly. I should not like to prophesy—it is a dangerous thing to do—but I am sure that it is in the Chancellor of the Exchequer's mind and in the minds of those in other countries who are concerned with these affairs that there is not perhaps all that much time in which to repair the breaches in the international currency system.
The second feature to which I must draw attention—and the right hon. Member for Barnet emphasised this aspect—is the increase in the tempo of the gale force of currency speculation. I am not using the word particularly pejoratively at the moment. I am just seeking the correct word to describe it. The right hon. Gentleman referred to the time when he was at the Treasury and he spoke of £20 million a day moving out of the reserves as being a cause of great concern. I am sure that at the time that his successors in the Labour Government were at the Treasury, £20 million would not have been regarded as an extraordinary figure. I imagine that in the last two years the figure has increased possibly even more—and that appears to be the general experience of countries.
The overwhelming reason for it is, as I understand it, a quite phenomenal growth in world liquidity and in the amount of money which is available and which can be used and moved quickly from one currency into another, and the

phenomenal growth, in particular, of the Euro-dollar market, which appears now to have the most enormous sums of easily mobilisable capital which can be tapped for any purpose by those who either fear for the stability of a particular currency or who are, frankly, simply concerned with speculation. The third observable and obvious point to make is that the international currency system we have known since the end of the war is now coming to an end.
I have before me a speech by the Prime Minister on 14th February to the American Chamber of Commerce when he said:
The Bretton Woods system predicted a dollar which was as good as gold: a dollar which would be universally accepted as a standard and as a store of international value, because it was convertible into gold, and because it was backed by the overwhelming and unchallengeable strength of the American economy. Twenty-five years later these assumptions no longer apply. The strength of the American economy, though still very great, is no longer so pre-eminent. The dollar is no longer convertible.
I use his words not because he is saying something particularly new, but he makes the point with clarity and brevity.
Of course some may regret the passing, as it were, of the Bretton Woods system. Others may reflect, as I do, that there was within it, quite apart from various instabilities to which I have already referred, one basic defect. There was no self-correcting mechanism within the system that forced upon countries who were in continual surplus changes in economic policy so that they would come more into balance. There were always stresses and pressures on the deficit countries for them to adjust, but on the surplus currencies and surplus nations there was none.
No one who has looked at the experience, certainly of Germany in the early 1960s, although not so much in the last two or three years, or of Japan in recent years—and I say this without wishing to single out these nations for special rebuke—can deny that the surpluses these nations have run over a period of years have been far too great for the health of the international currency and trading system.
I have before me the Japanese current balance over recent years. I know that Japan's trade surplus is far greater than its surplus on current balance because it is offset by the nation's deficit on invisible transactions. But in 1968 it was


running a current balance surplus of more than 1,000 million dollars. In 1969 it was over 2,000 million dollars, in 1970 just under 2,000 million dollars and in 1971 nearly 6,000 million dollars. I have not seen the figure for 1972 but I believe that it will be of the same order of magnitude. This makes tremendous demands on the other nations with whom Japan has been trading. The Japanese surplus against the United States in particular was one of the reasons that the United States was driven to the action of devaluing the dollar a fortnight ago.
So I draw the conclusion, from what I have described so far—if the correct conclusion—that because we have not ourselves as yet, for largely fortuitous reasons, because the pound has been floating through this present storm, felt the full blast, we should not conclude somehow that all is well or that we have plenty of time or that matters will be put right. That would be quite wrong. There are considerable dangers.
We must bend every effort to bring about the required reforms in the international monetary system. I do not pretend that that will be easy to achieve. I noted what the Chancellor said this afternoon. Many of us have followed the discussions going on in the Committee of Twenty as best we could. We have only to consider the range of matters that need to be solved to realise that agreements cannot be arrived at quickly.
I identify the problems briefly as follows. There is obviously the question of the new régime if we are to have an international system of fixed but adjustable parities. We must agree with others about what rules there should be affecting exchange rates and their alteration.
We must also deal with the whole problem of what the major new reserve asset will be now that people do not wish to go on holding dollars in anything like the same quantities as they have throughout the post-war period. Associated with that is the question of what has been described as the dollar overhang, which is now of staggering proportions.
It is important to remember that we cannot envisage any serious and successful negotiations between all the countries concerned, and particularly with the United States, on the currency and monetary questions involved without at the

same time settling what the United States feels to be the serious deficiencies in the world trading system. We should be wrong to ignore the problems that the United States feels that it faces, and to some extent genuinely faces, and has faced, in international trade.
With all its defects, the post-war one-world system has given the world a longer period of expansion in trade and prosperity than any period since the industrial revolution began. The United States sees that that world which was based upon the achievement of a nondiscriminatory one-world trade system is beginning to change as the European Community has been formed, for reasons that I shall not go into now but which are peculiar to Western Europe. Its regional influence has spread out into a large part of Africa and the Mediterranean area, and now the free-trade group of countries in Northern Europe has joined it as well.
Although a separate regional trading bloc based on Western Europe has not yet taken shape, has not yet raised high trade walls—on the contrary, the trade walls of both Europe and America have fallen in recent years—there is a fear, a threat. It works both ways. The more people talk about it and worry about what the others will do, the greater the danger of protectionism being pursued by Europe or the United States. That is to be avoided.
As my right hon. Friend the Member for Leeds, East (Mr. Healey) wisely said, we must envisage a joint approach to these problems. We must negotiate a sensible world trade arrangement with the Americans, which cannot exclude agriculture as well as industry, and the reform of the currency system that is so clearly needed. That is an agenda that is difficult enough without any extraneous additional complications, but unhappily we now have just such an additional complication, which arises directly from the attempt to form in Western Europe an economic and monetary union, which in many ways stands in the way of the kind of negotiations and approaches that we need to make in the interests of a world system that is so much more important.
The Chancellor gave us today his account of what happened during the last dollar crisis. He told us about the


talks he had with European finance ministers. He did not make the point, which virtually everyone else has made, that the European Community as a community was unable to find any solution to the problems. It could not arrive at a joint position. The Chancellor has been in the odd position of being rebuked in the European Assembly by his hon. Friend the Member for Saffron Walden (Mr. Kirk), who leads the Conservative delegation there, for having got together with France and Germany and not having behaved like a good Community man in that he did not bring in the Belgians, the Italians and so on.
I rather sympathise with the Chancellor in that matter. I can see the difficulties that would have been involved. But the plain truth is that whether the Chancellor met only two other finance ministers, or had the Commission breathing down his neck and the full panoply of finance ministers present, it would not have made a great deal of difference, because a common European policy could not be agreed. In a sense it was not necessary, because the Americans devalued and the Japanese agreed to float.
What disturbed me a great deal in the right hon. Gentleman's account of what happened was the various alternatives that were presented before the Americans resolved the crisis by devaluing. We must examine the alternatives that were placed on the agenda, because if a further storm should shake the currency systems of the Western world, I have no doubt that similar proposals will again be considered.
The Chancellor told us that there were three main possibilities. One was that the deutschemark should be unilaterally floated. When it is in balance, that may not be the right solution. But when it happened three years ago it was right for it to float up. What I fear very much is that the main reason why the Germans resisted and the French agreed that they should not float up was not that the Germans felt that their currency was perfectly fixed in relation to the dollar or other European currencies but that they felt that they would be breaking the common ranks of Europe if they acted unilaterally. That is a dangerous situation, because the conditions of stability do not yet exist because the economic

systems of the different countries are not such as to enable them to have joint policies.
The other possibility that was discussed was of a joint float. That was a much more important and dangerous proposal. The real danger of a joint float is that it implies that we must peg the pound in relation to the other currencies of Europe. That would then, of course, have been possible as a group, but with their relationships to each other fixed to float up against the dollar.
But that would have implied an end to our floating, and I do not believe that that would be in the interests of this country, and nor is it likely to be for a considerable time. Therefore, the news that the Chancellor is considering the technical and other problems which would arise does not please me a great deal, and I shall urge him at any rate to consider not just the technical feasibility but also the effect on the country and our resources if we were pegged and if a further storm swept across the world currency scene.
I come to a point of some importance. The Government have had an unhappy experience of economic and monetary union so far. The right hon. Gentleman had the experience of being a member of stage one before he was driven to float, but during that time, on his own account, £1,000 million of our reserves left the country in a single week. This experience of economic and monetary union has not been happy in keeping the snake in the tunnel.
What worries me in particular is the right hon. Gentleman's statement, made with colleagues in Europe a few days ago. Far from drawing the modest lesson that this was a rather dangerous affair altogether and a matter to be proceeded with very slowly, as the right hon. Member for Barnet said, the Chancellor and his colleagues said that they were going to accelerate the process, that they would bring matters to a conclusion on stage one at an even earlier date than originally intended.
That brings me to the whole question of the monetary fund which I understand is going now before the Council of Ministers for approval. It is a decision to set up a European monetary co-operation fund. It is already in draft and is up


for approval in March. It is due to be operated not later than 1st April. It is as near as that. We have not heard much about it yet.
My concern about it is that the fund is directly related to the efforts to maintain the snake in the tunnel, and we shall be contributing to the fund. The false hope is that, with a little help in short-term funds from European countries as well, we shall be persuaded to enter the tunnel and try to keep the pound there in spite of the losses which, in my view, we shall almost certainly sustain. If I have misunderstood the purpose of the fund I shall he happy to give way for the right hon. Gentleman to explain.
I cannot take as lightly as some have the Government's published statements about economic and monetary union. There has been a tendency for people to say, "The Chancellor does not mean what he says", or, "The Prime Minister is only bluffing and cannot really mean it." That is not a satisfactory or creditable position even if true. But even as recently as the summit conference last October, the Prime Minister made to the House a specific and 100 per cent. reaffirmation of the goals of economic and monetary union, including, as my right hon. Friend pointed out, full union by 1980. If anyone has any doubt on that they should read the statement again. Talking about the hopes of the Heads of Government, he said:
They decided to institute before 1st April 1973, by solemn instrument, based on the EEC Treaty, a European Monetary Co-operation Fund which will be administered by the Committees of Governors of Central Banks within the context of general guide lines on economic policy laid down by the Council of Ministers. In an initial phase the Fund will operate on the following bases:—
Concerted action among the Central Banks for the purpose of narrowing the margins of fluctuations between their currencies;
—the multilateralisation of positions resulting from interventions in Community currencies and the multilateralisation of intra-Community settlements;
—the use for this purpose of European monetary unit of account;"—[OFFICIAL REPORT, 23rd October 1972, Vol. 843, c. 809.]
I put this question directly to the Minister of State: am I right in believing that this timetable is still being adhered to? Do the Government intend to agree with the Council of Ministers that this Fund shall be established as from 1st

April? Do they agree that its purpose will be to support the narrow margins of our currency against theirs and can he tell us how much money has been set aside, or will be set aside, for this purpose? What will be the terms of the settlement between the various nations concerned in the periodic settlement dates?
My second question is also of considerable importance. The formula which the Chancellor and the Prime Minister have used in trying to defend their objective in this area of relationships with the currencies of Western Europe has involved talk about fixed but adjustable rates. If words have their proper meaning that can only mean that the Government do intend to bring floating to an end as soon as possible. That is what they have said. I hope that they have got their tongue in their cheek and that they will take account of all the circumstances, including the very recent one of the great currency storm a fortnight ago. If that has taught them anything, it should have taught them that it would be irresponsible and dangerous for Britain to peg in anything like the conditions we face today and in any circumstances that fall short of a considerable reform of an international monetary system which gave rise to these disturbances of which the floating of the pound is but one necessary consequence.
My last point dealing with fixed and adjustable rates is this. Even if that should turn out to be a medium-term rather than short-term purpose of the Government's policy for European currencies, let there be no doubt that "fixed and adjustable" means something very different from and falling short of the commitment to a permanent and irrevocable fixing of all parities which is the stated aim of an economic and monetary union, to be achieved not later than 1980, specifically and categorically re-affirmed by the Prime Minister at the Summit meeting of 23rd October.
Let the Minister of State tell us what is the Government's real aim. Are they seriously attempting to work for economic union and irreversible parities or a common currency which is the other stated objective by 1980, or are they working for this much shorter-term and much more modest objective of fixed and


adjustable exchange rates, to which they frequently refer?
Our advice to the Government is that in present circumstances, they should continue to float. They should turn their attention far more to the problems of reforming the difficult trade and currency situations which exist in the world's economic system and see to it that the commitment into which they have entered of economic and monetary union does not stand in the way of those reforms. As far as they can, they should disengage themselves from this commitment for which no one in Europe can seriously wish, other than the tiny minority of committed Federalists there.

8.40 p.m.

The Minister of State, Treasury (Mr. John Nott): I think the whole House—perhaps "the whole House" is not quite the appropriate expression, but those hon. Members present—will agree that this has been an excellent debate. I think that very often the thinnest attendances provide the best debates, and that has been the case today. Hon. Members on both sides have put forward very interesting and well-informed views on this difficult but vitally important subject. As my hon. and learned Friend the Member for Dover (Mr. Peter Rees) said, it has been a select seminar.
It was marred just a little I thought—I mention this only in passing—and only momentarily in the speech by the right hon. Member for Leeds, East (Mr. Healey) who started on a little Budget debate of his own, referring to rent increases, land prices, unification, threshold agreements and the rest. The comment I make in passing is that the only sad aspect of the sort of remarks which the right hon. Gentleman makes across the Floor of the House on these occasions is that he appears to have an inner compulsion to hunt around for the worst possible nuggets of gloom, grief and misery even if he can find them only in the pages of the Telegraph, as he did on this occasion.
I also felt that the right hon. Member for Stepney (Mr. Shore) was less than generous—I do not put it more strongly—when he referred briefly to the events which led up to the floating of sterling. We cannot entirely forget that both of those right hon. Gentlemen were mem-

bers of a Cabinet which abandoned nearly every one of their policy objectives to uphold the principle of fixed rates. I appreciate that we have moved on since then, but this is someting we cannot entirely forget when we receive the advice which the right hon. Member for Stepney has given to us tonight.

Mr. Healey: Would the hon. Gentleman assure us that he does not either forget the way in which the right hon. Member for Bexley (Mr. Heath), who I think is now leader of his Government and party, handled the political, moral and economic aspects of the decision at that time?

Mr. Nott: I am trying to keep the temperature low, so I do not think I shall allow myself to be drawn into a riposte on that one.

Mr. Healey: Very wise.

Mr. Nott: I come first to the main issue which has been discussed today, the question of fixed versus floating rates. I am expressing this in the broadest terms. We have heard diverse views on both sides of the House about the respective merits of each. The hon. Member for West Lothian (Mr. Dalyell), I believe, said that we were all floaters now, or something of the sort, but this has not been demonstrated in the debate. For instance, we heard a very good case for floating presented by my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley), but the case against was well argued by the hon. Member for Ashton-under-Lyne (Mr. Sheldon). My right hon. Friend the Member for Barnet (Mr. Maudling) judged that fixed parities were in general preferable but that floating could be advantageous for particular currencies from time to time.
For my part, I should say that the majority of Governments throughout the world which have actually to take responsibility for these matters believe that a system of fixed parities, although of course with provision for changes when a country's costs and prices are out of line, is the right one for the world monetary order. They include the Governments of less developed countries whose interest in international monetary stability, as I am sure the House will agree, is no less important than that of the countries of the European Economic Community.
As hon. Members have said, a floating rate can provide an automatic mechanism for countering speculative or other short-term capital movements although at the price of movements in the exchange rate which may be unwelcome from the point of view of trade and genuine investment. With fixed parities other arrangements are necessary.
One such arrangement is that, where a change in the exchange rate is justified by the emergence of a basic disequilibrium, the change should be made promptly before large speculative pressures can build up. But this does not deal with the situation in which there is no basic disequilibrium, as there was not with the deutschemark, and an exchange rate change would be inappropriate; or the much more difficult situation in which the underlying position is not as clear as the judgment or the fashion of the market might suggest.
There can be no simple or single answer to the problem. It is clearly important that the size of reserves and the scope for change in them should be adequate to provide defences against large-scale temporary movements. Movement within margins or adjustments of interest rates can be used to correct or moderate movements stimulated by arbitrage or similar considerations. There is need also, as EEC countries have explicitly recognised in a resolution last year and in the practice of many of them individually, for measures of control which, without disrupting normal trade and investment, will prevent or reduce short-term capital transfers and protect the domestic monetary situation from the effects which it might otherwise suffer.
We must not forget, however, that there has been an unusual background to the massive movement of funds of recent years. My right hon. Friend the Member for Barnet referred to this. The balance of payments of the country with the world's leading currency, the United States, has moved into very considerable disequilibrium following a long period during which, as far as the market was concerned, the primacy of the dollar was barely questioned. My right hon. Friend referred to the time when he was at the Treasury, when this disequilibrium had not yet shown itself. Until this situation is resolved, and the United States balance

of payments moves back into equilibrium, the problems of capital movements and of adjustments of exchange rates are bound to present acute difficulty. The achievement of a reformed and more stable system towards which the Committee of Twenty is working must provide a framework, within which some of these problems become more manageable. The adjustment process is one to which that committee is currently giving a great deal of attention. The adjustment process arrangements must strike a fair balance between the claims of stability and the need for flexibility. I think there would be wide agreement that these arrangements should be symmetrical in the sense that surplus countries should be as ready to adjust as are deficit countries.
There is also increasing recognition of the part to be played by objective indicators, although there are no doubt a number of problems which might arise. The argument of the right hon. Member for Leeds, East about speculation against an indicator is an interesting one which is very relevant to these considerations.
From what I have said, it will be clear that the consideration that has taken place in the Committee of Twenty, pointing the way to a strengthening of procedures which will bring to bear the collective expertise and authority of the international financial community on the resolution of these questions, whilst respecting the need for maximum practical freedom of action for individual nations, is vital.
My right hon. Friend the Chancellor mentioned two-tier markets, and they have been referred to several times in the debate. For the sake of moving on, I will not again go over the arguments for and against two-tier markets.
My hon. Friend the Member for Walsall, South (Sir H. d'Avigdor-Goldsmid) expressed concern about the role of the Euro-dollar market in the recent disturbances. I think it must be generally accepted that the Euro-dollar market, although it provides effective machinery for the movement of capital, does not cause these movements. The motivations of those who are protecting the value of the funds under their care or at their disposal is what matters fundamentally. These are


not so much speculative movements—although that was the term used by the right hon. Member for Leeds, East—as the natural consequences of growing trade and the growth of international companies. Therefore, a plea for controls on the Euro-dollar market is not the best response to recent events. What is needed fundamentally is to achieve a reformed international monetary system as the background to a better working of the adjustment process.
The right hon. Member for Leeds, East asked about sterling guarantees which he referred to as the Basle agreements. The sterling agreements will remain in force until September next. The guarantee clause, under which the bulk of sterling holdings covered by the agreements were guaranteed at 2·40 dollars, is in process of being implemented and a sum of £33 million has so far been paid over in respect of that implementation. We are in the process of discussing with the sterling agreement countries the way in which the guarantees should continue in operation while sterling is floating, but these talks are not complete. The future of the agreements after September is another question which we shall begin to discuss in the period ahead.

Dr. Gilbert: The hon. Gentleman knows that we have had correspondence on this subject. Can he say whether it will be part of the Government's purpose during these negotiations to ensure that, as a result of sterling having gone above the trigger point that has produced this payment on our account, we can get a refund?

Mr. Nott: I believe I told the hon. Gentleman at Question Time that many countries were involved. These are bilateral negotiations which must by their nature be confidential, so all I am able to say at present is that these matters are being considered and discussed now with the sterling agreement countries and we will in due course have to come to some kind of agreement about how we proceed following the first implementation which, as I have already explained, is taking place.

Mr. Ridley: Will my hon. Friend ensure that we do not enter into another disastrous agreement?

Mr. Nott: I do not think that such an agreement was entered into by this country but I take note of my hon. Friend's opinion.
The hon. Member for West Lothian referred to the SDR aid link and I intervened. I should, however, say that there have been suggestions—for more or less as long as there has been discussion of a new reserve asset—that its issue should in some way be made to facilitate a transfer of real resources from developed to developing nations, and so to foster economic development. This matter has not yet been considered in the Committee of Twenty discussions. It is on the agenda for the next meeting of Deputies, although a number of possible forms of link have already been considered in the International Monetary Fund. My right hon. Friend the Chancellor set out our general approach to this matter at the IMF meeting last September and I would be delighted to send the hon. Gentleman extracts from what my right hon. Friend said.
I do not think I will go into the question of rates of exchange and domestic prices again since my right hon. Friend covered this point in his opening remarks. I will repeat what he said:
Overall there should be little or no impact on the total of our trade or on the cost of our imports. We may lose in some markets but gain in others and taken together these effects should broadly balance out.
The point has been made that there was a difference between remarks made in a statement yesterday by my right hon. Friend the Minister of Agriculture, Fisheries and Food and the percentage change to which my right lion. Friend the Chancellor referred today. Sterling has depreciated by 5 to 6 per cent. in relation to the EEC agricultural unit of account, a gold-denominated constant, but by 4 per cent. in relation to EEC currencies at present market rates. These amounts are consistent because the EEC currencies have themselves depreciated in relation to the unit of account since 12th February. It is the unit of account relationship which is important for settling arrangements under the CAP. I should explain that these percentages will change frequently.
Since my right hon. Friend spoke this afternoon, I have had a report that at


the close of the market today sterling was 3·3 per cent. above the pre-crisis dollar value and 4·3 per cent. below the weighted EEC average. I do not think that hon. Members should be surprised if these percentages change day by day, because exchange rates are fluctuating.
I now come to the main point made by the right hon. Member for Stepney. It was not surprising that he concentrated his speech on economic and monetary union. I think the right hon. Gentleman sought to persuade himself that recent events had in some way hindered progress towards EMU. He also felt that EMU would hinder international monetary reform. The truth is that the determination of the EEC countries to press ahead with moves towards closer union has been increased.
At their meeting on 14th February the Council of Finance Ministers, after a full discussion of the recent currency developments, reaffirmed their determination to press on with the development of EMU and in particular to bring forward the date by which studies are to be made of short-term monetary support facilities within the Community and of reserve pooling. The Government warmly welcome those decisions, but we ought to be clear about what is involved.
The recent disturbances have brought home to the member States of the EEC—if they needed any convincing, which I do not believe they did—that we must, as my right hon. Friend said, press on with the work of international monetary reform which is so urgently necessary, and that entails Europe evolving a common approach to international monetary matters. The development of a European monetary personality is therefore complementary to the work of international monetary reform. Stability in the world system could and should be fostered by the emergence of an integrated, clearly expressed European view, so I do not in any way share the fears expressed by the right hon. Gentleman.

Mr. Healey: Will the hon. Gentleman accept that what worries us is not that the European countries should try to reach a common view? If they can find a sensible one, good luck to them. What we are concerned about is the commitment to a European monetary union, namely, to establish a single currency, or,

at the minimum, fixed, unvarying and unchangeable exchange rates between the various European countries for which the snake in the tunnel agreement, which has so disastrously collapsed in the last few months, was supposed to be the first step. Will the hon. Gentleman address himself to that, because that is what the Chancellor of the Exchequer pledged himself to do along with eight other Ministers of the enlarged Common Market at his meeting with them last week?

Mr. Nott: I was just about to come to that when the right hon. Gentleman intervened. I assure the right hon. Gentleman that there is no intention of proceeding to EMU precipitately. The intention is to develop the process in well-thought-out stages in which the economic and monetary sides of EMU will be handled in parallel. No question of premature and irreversible locking of exchange rates can arise. The right hon. Member for Stepney knows a great deal about these matters. Of course a return to fixed but adjustable parities—which is the Government's policy—as soon as circumstances permit falls short of a single European currency. I think that that is a statement of the obvious.

Mr. Healey: The hon. Gentleman has not even attempted to address himself to the problem which I put. Let me again put it to him fairly and squarely. Does he believe—and do the Government believe—that it is possible in less than seven years from tonight for all the members of the enlarged Common Market to have either a single currency or to have established between their various currencies exchange rates which are fixed and immutable? Those are the precise terms of the agreement to which the Prime Minister committed the Government last October and the Chancellor of the Exchequer committed the Government last week.

Mr. Nott: The right hon. Gentleman knows what was in the summit communiqué as well as I do.

Mr. Healey: Answer the question.

Mr. Nott: That is the answer to the question. It was clearly stated in the summit communiqué that economic and monetary union is the Government's objective. If we look to see what is going on now, we see a process of consideration


of how we might move to stage two of EMU. That is exactly what is happening in Brussels at present, namely, consideration of the various means by which we might advance to stage two. That does not prevent the objective from being any the less valid.
The right hon. Member for Stepney and also my hon. Friend the Member for Kensington, South (Sir B. Rhys Williams) mentioned the European Monetary Cooperation Fund. In terms of the functions which the fund will be called on to perform in its initial phase, I appreciate that my hon. Friend regards this as a mouse because he feels that its objectives are too modest. This criticism has also been made in the European Parliament. The right hon. Member for Stepney takes the opposite view.
It is right, and I confirm, that the European Monetary Co-operation Fund is concerned with the snake-in-the-tunnel scheme and the fund will also take over the existing short-term monetary support arrangements between the central banks of the Communities. Although its initial functions are modest, there is no object in setting up the fund if following its establishment—and I shall come to the date—there is not then further consideration of how it might develop further. It is true that the fund should be established by 1st April in accordance with what the summit decided. It will then be possible to develop it, enlarge it and build it up as we go along.

Mr. Shore: The House has not been told a great deal about this fund and we do not know its size. Perhaps the Minister can tell us. If the fund had existed a year ago, would it have been of a kind or magnitude—and if it were, would the hon. Gentleman have thought it wise—to have resisted the floating of the pound and the maintenance of the pound as a snake in the tunnel?

Mr. Nott: It did not exist and that is a hypothetical question. There were arrangements to make settlements under the snake-in-the-tunnel scheme and it is intended that this fund should take over the present arrangements.
The right hon. Member for Stepney asked about the size of the fund and the settlement terms. These matters are not yet decided. I should be happy to give

more information to the right hon. Gentleman if I possessed it, but it has not yet been decided.
This debate has concentrated mainly on the direct problems of the international financial community. My right hon. Friend the Chancellor has stressed how in the last few weeks timely international co-operation dealt successfully with a major crisis in international monetary relationships.
Finally, I turn to consider the other essential prerequisite, namely the economic health of the world in its trading relationships, and I wish for a few moments to concentrate on the theme of co-operation. In the post-war era there has been a remarkable growth in the interchange of goods and services among the nations of the non-Communist world. Between 1950 and 1970 world exports increased fivefold in value. It is only by further increasing the amount of international trade that the developed countries can secure continued growth in their domestic economies and maintain a steadily increasing flow of assistance to the developing world. It is essential that the momentum of post-war trade liberalisation should be maintained If it is lost, the inevitable stress on the economic system will encourage a general slide into protectionism. Therefore, this year is a vital one for the growth of world trade through international co-operation.
Like my hon. Friend the Member for Walsall, South, I agree that it is fatal to talk in terms of confrontation and to talk about chauvinism, as the right hon. Gentleman did. Attempts to polarise the situation or to look at any one element in it are not what is needed at the present time.
The enlargement of the European Community has created the opportunity for Europe to establish a new pattern in its relationships with the rest of the world. At the European summit meeting last October this was fully recognised.
In the trade sector the Community reaffirmed its commitment to further progressive liberalisation and it gave a lead on the timing of multilateral trade negotiations. The Community intends to be ready with its approach to these talks by 1st July and has expressed its hope that an effort on the part of all participants in the talks will allow them


to be completed in 1975. This is not the language of confrontation.
I am equally convinced that the United States Government fully recognises what is at stake in trade. Of course the size of the United States current account deficit and the impact of Japanese competition encourage protectionism and create a very pressing problem for the United States administration, but the resolution of the monetary crisis should ease this problem. I know that my right hon. Friend welcomes the undertaking to give priority to a Trade Bill in the statement of Mr. Secretary Shultz on 12th February.
The hon. Member for West Lothian referred to the interest equalisation tax, which is a tax imposed on United States citizens or residents purchasing foreign equities and bonds from foreigners. Its purpose is to offset any interest rate attraction to potential borrowers in the New York market. The effect of phasing it out would be to restore access to that market to foreign borrowers, and this can be expected to result in a capital outflow from the United States. The precise effects are difficult to ascertain and would depend on, among other things, relative interest rates in the various financial centres. But I can assure the House that further thought is being given to the consequences of this American decision.

Mr. Dalyell: I would like to thank the Minister of State for the trouble he has taken over that answer, and I agree that it cannot be pursued.
If, without ribaldry, I may revert to the question of Japanese public spending, it would seem to some of us that unless there is a rise in Japanese public spending the problem of the yen will be with us for a long time to come. Could it be put seriously to the Japanese that it would be very helpful for the rest of the world's monetary problems if they were to do something about Tokyo Bay and the pollution of Osaka?

Mr. Nott: Personally I find this an interesting subject, but I think the House is in a mood now for me to come near to the conclusion of my speech. I have been on my feet for 26 minutes and to go into the problems of the pollution

of Tokyo Bay would delay things more than the House would wish.
In this debate we have been considering the course of events which led to the decisions announced just over a week ago. We have been considering the pressures that underlay them and the immediate courses of action to which they gave rise. We have been considering the pressures the consequences of those decisions in terms of their short-term economic effects and, more generally, of the development of the Community and the direction of the future reform of the monetary system. These have been major events, and it is surely right that this House should assimilate them and interpret their consequences, although it will be some time, of course, before the exchange markets settle down.
There has been widespread agreement not only in the course of today's debate but in the international community that the solution reached to the immediate disturbances was the right one. It was addressed to the principal problems in the situation—the United States deficit and the Japanese surplus. It was prompt. There is also widespread acceptance of the broad lessons which have emerged—that these questions can be satisfactorily resolved only by international action whether in the field of payments or of trade, and that we should press ahead with this work——

Mr. Healey: Before the hon. Gentleman sits down, will he address himself to a question which must have come to all our minds when he said that within just over five weeks from now the Government will contribute money to a European monetary fund the purpose of which is to maintain the snake in the tunnel? Can he say whether by that date sterling is intended to be in the tunnel with the other snakes—in other words, that there is to be a repegging of sterling? If not, are we paying this money into the European monetary fund to keep other currencies in the tunnel?

Mr. Nott: To my knowledge, the right hon. Gentlemen has been told at least five times today what the Government's policy is. We shall return to a fixed parity as soon as circumstances permit——

Mr. Healey: Answer the question.

Mr. Nott: I have answered the question. I am tempted to quote from speeches made by the right hon. Member for Leeds, East on this very subject. I have quotations ready. It would be a most enlightening exercise. I have, for example, HANSARD of 21st January 1971. On that date the right hon. Gentleman made a speech almost every word of which is in complete contradiction to what he said today. However, I shall not quote it to the House because this has been an extremely friendly debate.

Mr. Shore: The hon. Gentleman has genuinely misunderstood my right hon. Friend the Member for Leeds, East (Mr. Healey). My right hon. Friend was asking about the uses of the monetary fund which is to be set up and which is to come into operation in five weeks' time. We know the details. My right hon. Friend was asking whether the fund, especially Britain's contribution to it, will he used to help those currencies in the Community which are being held within the narrower bands around their parities.

Mr. Nott: I thought I had explained that. One of the principal initial purposes of the fund will be to deal with settlements under the snake-in-the-tunnel scheme.
International monetary affairs is a turgid subject to the ordinary man in the street. In his view we appear to live through a succession of crises which do not seem to matter to him very much. Understanding of the issues has not been assisted by the jargon so beloved by experts. The whole topic is complicated enough without making it almost meaningless by a language of its own.
Nevertheless the debate has been an excellent one in every sense, and I am sure that the House has a lot to offer on the subject. In that spirit, although I must not commit my right hon. Friend the Leader of the House, it may be that in the course of the next few years we shall have an opportunity to discuss this interesting subject again.

Mr. Michael Jopling: I beg to ask leave to withdraw the Motion.

Motion by leave withdrawn.

LAND COMPENSATION BILL

As amended (in the Standing Committee), considered.

New Clause 1

COMPENSATION IN RESPECT OF AGRICULTURAL HOLDINGS

'(1) This section has effect where in pursuance of any enactment providing for the acquisition or taking of possession of land compulsorily an acquiring authority—

(a) acquire the interest of the landlord in an agricultural holding or any part of it; or
(b) acquire the interest of the tenant in, or take possession of, an agricultural holding or any part of it.

(2) In assessing the compensation payable by the acquiring authority to the landlord in connection with any such acquisition of an interest as is mentioned in subsection (1)(a) above—

(a) there shall be disregarded any right of the landlord to serve a notice to quit, and any notice to quit already served by the landlord, if the notice would be or was effective by reason only of treating the use for the purposes of which the interest is being acquired as falling within section 24(2)(b) or 25(1)(e) of the Agricultural Holdings Act 1948 (land required for non-agricultural use); and
(b) if the tenant has quitted the holding or any part of it by reason of a notice to quit which is to be so disregarded, it shall be assumed that he has not done so.

(3) In assessing the compensation payable by the acquiring authority to the tenant in connection with any such acquisition of an interest or taking of possession of land as is mentioned in subsection (1)(b) above (hereafter referred to as "the tenant's compensation"), there shall be disregarded any right of the landlord to serve a notice to quit, and any notice to quit already served by the landlord, if the notice would be or was effective by reason only of treating the use for the purposes of which the interest is acquired or possession is taken of the land as falling within the said section 24(2)(b) or 25(1)(e).

(4) Section 42 of the Agriculture (Miscellaneous Provisions) Act 1968 (tenant's compensation to be assessed without regard to his prospects of remaining in possession after contractual date) and section 15(1) of that Act (effect on tenant's compensation of provision enabling landlord to resume possession for non-agricultural use) shall cease to have effect.

(5) The tenant's compensation shall be reduced by an amount equal to any payment which the acquiring authority are liable to make to him, in respect of the acquisition or taking of possession in question, under section 12 of the said Act of 1968 (additional payments by acquiring authority in circumstances described in subsection (1)(b) above.

(6) If the tenant's compensation as determined in accordance with subsections (3) to (5) above is less than it would have been if those subsections had not been enacted, it shall be increased by the amount of the deficiency'.—[Mr. Eldon Griffiths.]

Brought up, and read the First time.

The Under-Secretary of State for the Environment (Mr. Eldon Griffiths): I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker (Sir Robert Grant-Ferris): With this proposed new clause it will be convenient to consider the following Government amendments:

No. 96, in Clause 74, page 71, line 4, at end insert:
'and "landlord", "tenant" and "notice to quit", in relation to an agricultural holding, have the same meaning as in those Acts respectively'.

No. 97, in page 71, line 29, after 'Wales', insert:
'and otherwise than in relation to an agricultural holding'.

No. 99, in Clause 75, page 72, line 6, leave out subsection (3) and insert:
'(3) Section (Compensation in respect of agricultural holdings) above does not affect any compensation which fell or falls to be assessed by reference to prices current on a date before the passing of this Act, and the other provisions of Part IV of this Act relating to assessment of compensation do not affect any compensation which fell or falls to be assessed by reference to prices current on a date before 17th October 1972'.

No. 104, in Schedule 2, page 84, line 53, at end insert:
'1968 c. 34.

The Agriculture (Miscellaneous Provisions) Act 1968.

Sections 15(1) and 42 except in relation to compensation falling to be assessed by reference to prices current on a date before the passing of this Act and except for the purposes of section (Compensation in respect of agricultural holdings) (6) of this Act'.

9.15 p.m.

Mr. Griffiths: On the face of it, this is a complicated new clause, but I hope that its purpose is clear and simple. It fulfils the undertaking which I gave in Committee on 25th January to help the tenant farmer without breaching the market value principle. We have done this by having regard to the fact that although he is usually in law a tenant from year to year, in practice he has virtual security

of tenure for life. This principle is embodied in Clause 41 which allows the business tenant's security of tenure to be taken into account.
It may be for the convenience of the House if I attempt to summarise the position on compensation as it applied to the tenant and to the owner-occupier farmer before the Bill, to indicate which changes were made in Committee, and, finally, to add to those changes the additional advantages which will arise if the new clause is accepted.
Before the Bill was introduced, compensation was payable on the basis of the market value of the land taken. I am dealing primarily with the tenant farmer. Compensation was paid to him for the value of his unexpired term or interest in the land that was taken. This was based on the profit rental value, if any, of the land taken and loss of profits. In practice this usually amounted to between one and two years according to the circumstances.
In addition, compensation was paid for tenant right—that is the unexhausted manurial values, and so on—for the value of the improvements that he put it in, and for loss or injury, disturbance, removal costs and loss on forced sale of live and dead stock. Experience showed that a minimum of one year's rent would normally have been paid for disturbance items. In addition, there was the payment of four times the rent to assist in the reorganisation of the tenant's plans.
Under the Bill, as amended in Committee, the tenant farmer and indeed the owner occupier-farmer, obtained a number of additional benefits. First, if he is displaced from the farm house that he occupies, subject only to the length of his occupation of that house, he becomes entitled to home loss payment. Secondly, the tenant farmer who is served notice to quit after notice to treat has been served on the landlord will also have the right to elect to have his compensation assessed on the normally more favourable compulsory purchase basis as if notice of entry had been served.
Thirdly, where part only of a tenant's holding is being compulsorily acquired, he will now be able to elect to treat the notice of entry as a notice relating not to the part but to the entire holding if the remainder of his holding is not capable of being farmed either by itself or with


other land as a separate agricultural unit. Those were the three additional benefits agreed to in Committee.
Under the new clause there is a further benefit. Essentially, it is that the unexpired term or interest will henceforth include the security of tenure provided for under the Agricultural Holdings Act 1948, unaffected by the proposals of the acquiring authority. That is an important additional benefit.
It follows, however, that to enable the agricultural tenant's security of tenure to be taken into account, it is necessary to amend the effect of a decision taken in the other place in the case of Rugby Waterboard v. Foottitt and Shaw Fox and a decision of the Court of Appeal in Minister of Transport v. Pettitt. These enable the effect of an acquiring authority's scheme to be disregarded as it affects the nature of the interest in the land which is being acquired—for example, a change from freehold land subject to a protected tenancy to freehold land subject to an unprotected tenancy.
This proposal is in line with Clause 42 which provides that landlords shall not have the benefit of vacant possession value where this was attributable solely to the rehousing of the tenant in consequence of the particular compulsory acquisition.
I said at the beginning that the clause was complex. Its purpose is clear, and I believe it genuinely improves the situation of the tenant farmer and I ask the House to accept it.

Mr. Mark Hughes: I fear that the clause ought to be called the Solomon Grundy clause, tabled on Monday, buried on Thursday. The time allowed by the Government for the proper consideration of the implications of the clause is woefully inadequate.
On Monday I was in Brussels as a member of a Select Committee of the House. I returned early Tuesday morning by which time I was able to procure a copy of the new clause. Having been unable to go through the simple mechanism of contacting my local NFU and other interested bodies in the North-East, I have in the time available not received the necessary information about the precise indications of this fundamental change in tenant compensation.
This is no criticism of either the right hon. Gentleman or the Minister, but rather of the Leader of the House and the organisation of parliamentary business. A clause tabled on Monday cannot be expected to be debated finally in this place the following Thursday night.
It would be wrong to allow the clause to go through without registering a strong complaint about this undue haste and the insufficient time afforded to the House for dealing with something which I believe the hon. Gentleman himself referred to in Committee as "a legal labyrinth". In view of what I have said about the lack of time, I am willing to withdraw anything I may now say that is incorrect.
First, the clause suggests that because, under the Agricultural Holdings Act, an annual tenancy has every appearance of being a life interest, it gives security for life, and the compensation payable to a tenant should be determined according to a quasi-life interest position. That is my understanding of the proposal contained in the new clause.
One therefore has to look at such recherché matters as the Government actuary's life tables. A tenant aged 30 may well receive more compensation under this clause than a tenant aged 45 or 60. According to the Government Actuary's figures a male aged 30 in England or Wales has a life expectancy of 46 years. If he should be an agricultural tenant, under the 1946 Act, his expectancy is 46 years. If, unfortunately, he happens to be in Scotland, it is only 44·5 years. His interest, by the time he has reached the age of 60, has diminished to 15·1 years in England and Wales—and the poor Scotsman again is at a disadvantage at 14·47 years.
The first question I ask the Minister is whether, in calculating the reversionary interest of the landlord or the tenant, the Government Actuary's figures of life expectation, rather than the particular circumstance of the individual tenant, are to be taken into account. If it is the first, what follows inevitably is that the tenant farmer aged 60 gets rather less than a third of the compensation of a tenant farmer aged 30. If this Government are introducing a scheme which provides that the older one is the less compensation one gets, let them spell it out.
As I understand the legal consequences of the new clause, it is precisely that. A tenant's interest is determined by the value of his reversionary interest on an annual tenancy basis. By converting the right under the 1946 Act to be equivalent to an annual tenancy, one thereby automatically determines the level of compensation in terms of the age of the person to be compensated.
The health prospects of the tenant may also be taken into account. Therefore, the tenant who has a history of having had a heart attack may get only half the compensation, whatever his age, of his next-door neighbour who has not had a heart attack. Is this what the Government intend? Is this what is meant by the new clause, that the "life interest" of the tenant, with all the forgivings of previous legislation that are involved in it, ends up by meaning that the older and the more infirm the agricultural tenant, the lower the proportion of the gross compensation accruable to landlord and tenant alike he receives? If, at this point, I am totally misleading the House, or myself, I should be more than willing to give way to the Minister that he may make this clear.

Mr. Eldon Griffiths: I am not going to suggest that the hon. Gentleman is misleading the House. I will simply tell him what the facts are. What is provided here is that compensation shall be paid for a tenant's unexpired interest. It is not for the Government to tell the valuer how to arrive at this. The valuer is an independent professional person. He will make the judgment.

Mr. Hughes: I am grateful to the Minister. So what the Government are saying is that unexpired interest, although it happened to be consequent on the life expectancy of the tenant is nothing to do with the Government. That is a most appalling statement. What the Government are saying is that, because they are not to determine the compensation, the district valuer has to diminish the compensation consequent upon the age of the tenant.
The unexpired value of a guaranteed security for life must be, according to all legal precedent, dependent on the age at that time of the person involved. No tenant of 60 has an equal unexpired interest

in a life tenancy of a tenant aged 30. For the Government to pretend that there is an equality of treatment between those two is to delude the House and everyone else. It is clear that an unexpired life interest, however it may be determined—whether by the Government or a district valuer—is, in the end, determined by the age and the expectancy of the tenant. Under the Agricultural Holdings Act the security of tenure is de facto for the life of a tenant, and it is that de facto interest which the clause protects and enshrines for the purposes of compensation.
9.30 p.m.
In the case of a company which happens to be a tenant, a company which cannot, by definition, die—if Bloggs and Company is the tenant—I should like the Minister to tell me the unexpired life expectancy of a life that, by definition, is sine die. This land is held in mortmain. Therefore, to calculate the tenant's interest as a proportion of the freehold interest for a company that has no possibility of cessation seems to be a difficult conceptual problem if nothing else.
I turn to the specific problem of my county. I ask the Minister to state the position where, as is frequently the case, the Church Commission is the first landlord, the National Coal Board—a corporation that has no life in any normal sense of the word—is the tenant, and the sub-tenant of the NCB is the actual occupier. As I read it and on the advice I have received, nothing in the clause covers the problem of the sub-tenant in County Durham of the NCB.
As one who has purchased property from the leasehold of the NCB with a reversionary interest to the Church Commission, I know only too well the highly complex problem faced by an agricultural tenant of how much one pays to the NCB and how much to the Church Commission on its reversionary interest. How does one calculate the compensation under this clause payable to the tenant who is, in a sense, a sub-tenant of the NCB from the Church Commission? There is nothing in the clause or in all the Minister's comments in Committee or elsewhere that makes the position of this sub-tenant clear.
Turning to the next stage, this is the problem of the agricultural worker.


Under the clause, if a compulsory purchase order is obtained and the land and housing of a farm are acquired, even if the tied cottage is not demolished, does the acquiring authority retain the power vis-à-vis the agricultural worker living in the tied cottage by virtue of his previous agricultural employment? What is the position of the agricultural worker who suddenly finds that his home is purchased over his head? This is not a question of home transfer. The home may still exist. Who becomes his landlord? How is he secured in his tenure, independent of that tenure having previously been consequent upon its performing certain agricultural activities? Nothing in the short space of time between the drafting of the clause and the Minister's statement in Committee has clarified the position of the agricultural tenant.
Take, for example, the case of a farm which is compulsorily purchased and where an agricultural worker is made redundant because he is not needed on the land. He has a right to apply for redundancy payment, the cost of which in part accrues to the tenant or occupier who previously had been his employer. Does that employer have the right to transfer any liability therefrom to the purchasing authority as a consequence of that compulsory purchase? It may well be that the tenant farmer is required to pay a redundancy payment to his employee as a direct consequence of compulsory purchase. Does that farmer have a right to discount that cost automatically and receive it in return from the purchasing authority? Nothing in the clause or in the Minister's statement this evening throws any light on that problem.
There is a further difficulty that in subsection (5) the whole notion of a rent multiplied by a certain number of years is thrown out. What is quite clear, whether one reads the Estates Gazette or whatever, is that the classic relationship between rent and purchase value, which used to be expressed in terms of so many years purchase, has of the last few months, if not years, ceased totally to have any relevance. Will the Minister spell out whether the compensation under this new clause is to suggest that the rent, whatever it may be, is the basis and that the tenant, whatever the commercial

value of the land, gets his compensation on the basis of the rent, or whether he gets it on the basis that the rent should have been a particular proportion of the purchase value? The rent can vary, and on recent sales it clearly has varied between 1 per cent. and 7 per cent. of purchase value. If calculation of the tenant's interest is based upon an actual rent, as opposed to a notional rent, it affects him fivefold, or it may well, and there is therefore, again, grave uncertainty as to the effects of it.
I am not certain to what extent it is reasonable to draw an analogy between the clause and the non-existence of a tenant's right to farm loss payment. The tenant on an annual tenancy is treated under the clause as having a life interest or quasi-life interest, yet under the farm loss payment clause it is clear that he does not have that, because he must have had a three-year lease or more. Where do we stand? What is the position of the tenant under the new clause and the farm loss payment clause?
There is the very complex problem of the aggregation of tax liability in respect of the compensation under the clause, particularly subsection (5). Under the 1968 Act compensation was not liable to tax, but I understand that the compensation under subsection (5) may well be subject to tax. Does the change alter the tax position of the tenant receiving compensation? Is it received gross or net of tax?
In sum, although I welcome the clause as an improvement, it is a snare and a delusion for a large number of tenants. A majority of them may well receive little or no benefit. It is a parading of hearts intent on doing good, when in reality, when it comes down to the Lsd that is transferred, a large number of tenants will receive no greater benefit consequent upon the clause.

Sir Robin Turton: I had considerable sympathy with the opening remarks of the hon. Member for Durham (Mr. Mark Hughes). On 30th January my hon. Friend the Under-Secretary told the Committee that he would table amendments as soon as possible. He said,
I hope that that will be done during the Committee stage so that the Committee may have the opportunity to debate them, rather than waiting until Report."—[OFFICIAL


REPORT, Standing Committee A, 30th January 1973; c. 325.]
In fact, we did not see the amendments until Tuesday. My hon. Friend the Member for Rye (Mr. Bryant Godman Irvine) and I tabled an amendment to leave out subsection (5), an amendment which was not selected, probably because it was tabled so late.
I disagree with the hon. Gentleman, in that I feel that the clause is a considerable advance. Before it was tabled the owner-occupier or landlord was properly looked after, but there was a tremendous gap for the tenant. The clause is a welcome attempt to put the tenant's position right. Though I have some criticism of it, I am the first to express gratitude for that, and I had hoped that the hon. Member for Durham might express gratitude.
My hon. Friend the Under-Secretary said in Committee:
I summarise the position by pointing out that the tenant farmer will benefit from the full compensation arrangements laid down in the Bill In addition he will be able to obtain the home loss payment"—
That I agree with.
He will receive the farm payment, too, where that is appropriate."—[OFFICIAL REPORT, Standing Committee A, 30th January 1973; c. 325]
I should like to have that clarified, so that we know what we are talking about. As I understand the Bill, the farm loss payment is limited to where the occupier has an owner's interest. Therefore, it will not apply to the tenant farmer. That is one of the reasons why I think that the clause is so necessary.
The drawback to the clause is, as the hon. Gentleman suggested, that it is very hard to discover what a particular farmer will receive under it. It will put a heavy burden on district valuers, and many cases will have to go on appeal to the Lands Tribunal. It would be much better if we could have the kind of formula which my hon. Friend the Member for Northants, South (Mr. Arthur Jones) proposed so that one knew exactly where one was on so many years' rental value.
9.45 p.m.
Apart from that, let us try to see how we can clarify this provision and improve it. We are in difficulty in understanding

what is meant by subsection (5) of the new clause. It refers to the case where farmers are receiving, under Section 12 of the 1968 Act, a payment in respect of the reorganisation of their business—not compensation. For some odd reason, however, the Government have made that factor a deduction from the compensation under the new clause. I believe that they are in error in doing so. In dealing with a matter for compensation which is subject to tax, and a matter of payment for reorganisation of one's livelihood, which is not a matter which becomes taxable, we are in difficulty. It is very hard to construe subsection (5). I understand that many agricultural lawyers have spent an anxious 48 hours trying to understand it and have found it impossible.
Does subsection (5) mean that one first finds out the compensation one gets under the new clause, adds to that the compensation under Section 12 and then, having got these two figures, adds them together and deducts the payment under Section 12, calling that compensation? If that is so there is a danger, in mixing something that is taxable and something that is non-taxable, of putting the tenant farmer in a much worse position.
It may be argued that what one gets under Section 12 is the floor and that this is a topping-up. But again it is hard to see why we have to introduce this one category of payment that the tenant farmer receives and nothing else. If a farmer is not entitled to the Section 12 payment, he is put in exactly the same position as the tenant farmer, who is entitled to the payment. That is hardly fair because all that the tenant farmer is asking for, is receiving and has received since 1968 is a sum to enable him to go to another holding, to change his husbandry, probably to suffer certainly diminished profits and perhaps loss in the first year of the new holding. Since 1968, through the changes in the price of land and rental value, he has been suffering to a greater degree than he did in 1968.
This new clause would be much better without subsection (5). To treat farmers fairly the district valuer will seek to ascertain the goodwill value of the security of tenure of the farmer. No doubt that will be conditioned by age. That is nothing new because it is found in Clause 40. I thought that the hon. Member for Durham was exaggerating here. The valuer


will be estimating the value of the security of tenure of the holding. It must be different as between someone who is very old and about to retire and a young man with the whole of his agricultural future before him. It is right that the young man deprived of that future get a larger amount.
Subsection (6) envisages a situation whereby tenant farmers will receive less than they would if the clause were not enacted. We ought to be told exactly in which cases this will happen. When we are trying to put right the position of the tenant farmer I find it hard to believe that there will actually be cases of them receiving less as a result of this clause than they would if it were not passed.
This has caused a certain amount of worry in farming circles because we thought we had a generous Government who would put the tenant farmer in the same position as those operating small businesses outside agriculture. It is worrying to see that under the subsection we envisage a situation where the tenant's compensation is less than it would be if the subsection were not enacted.
I welcome this attempt to put right the position of the agricultural tenant, because he has been at a great disadvantage. Agriculture has not been treated as have other businesses. A shopkeeper gets his goodwill and used to be far more generously treated than the agricultural tenant. This is being put right, but in too hasty a manner. It is a complicated piece of drafting and I hope that the Government will use the opportunity provided by another place to get it in a more intelligible form—without subsection (5).

Mr. Norman Buchan: It might be useful if I speak now. I shall be brief because we have a vast amount of amendments before us, dealing not only with agriculture but with important aspects of local government. It behoves those of us dealing with agriculture, who have had a good innings, to be brief.
There is a good deal of truth in the point the Minister made about the clause being extremely complex. While we recognise and appreciate its purposes, we are anxious about the time scale which we and outside organisations have been given.
This matter arose from a long and sometimes complex series of discussions in Committee. The Committee stage was one of the least political Committee stages in which I have ever taken part. There was constant inter-party support. We pressed strongly one clear concept: that the tenant farmer had to be considered and safeguarded. It was the assurance given by the Government which gave rise to the clause. We are glad that the Government have honoured their commitment to introduce a clause to look after the interests of tenant farmers. However, we regret the timetable. It is a Solomon Grundy situation. Organisations, including the NFU have had difficulty in ensuring that some of the anxieties are being properly dealt with.
Also, while thanking the Government for bringing this proposal forward, r should have thought that much of the basis of the argument employed by hon. Members on the Government side and by me about the nature of the compensation has been ignored. We all argued on the basis of a specific formula, some kind of terms and a clear basis for compensation. I suggested a total option type of formula. I agree that there is an element of option, but the basic formula has not been used in such a way as to cover the anxieties which now arise. Provision could have been made for a person to choose in his own interests an option which could have safeguarded him. Rather than have the compensation in the hands of the district valuer, I would prefer a clear formula of one kind or another, perhaps by an extension of Section 12 of the 1968 Act. That might have been the best way. It is difficult to see how the district valuer will evaluate this new concept which is totally analogous to the small tenant or owner. Anxieties have been created.
If the compensation is to be considered separately, all the points raised by my hon. Friend the Member for Durham (Mr. Mark Hughes) become valid. However, I enter this caveat on his criticism. I do not think that those of us who have argued for this change should necessarily put ourselves in the position of asking for individual compensation for one person as against another. We must not jettison completely, even in the interests of agriculture, the concept which would apply here. Nevertheless there will be complexities and I have no doubt that a


number of appeals will follow. I think that the right way of tackling this problem would have been by a formula of the kind we suggested with or without an option. Certainly that is what the unions would have preferred and what I as a politician would have preferred.
Then we come to the problem raised by subsection (5). This has presented a very real worry. An amendment has been put down to delete the subsection, but that amendment is not to be called. I would have supported it. The Government must think again very quickly in the intervening days before the Bill goes to the Lords. If they do not, I have no doubt that others will be stimulating the Lords to think about this. In some ways subsection (5) would reduce the amount of compensation under the 1968 Act. It seems strange that that should happen in this way. Quite apart from the danger that it might leave the tenant in a worse position, it is spoiling a reasonable ship for a ha'p'orth of tar. If the worries which have been expressed are realised, the position will be even more serious——

It being Ten o'clock, the debate stood adjourned.

Ordered,
That the Land Compensation Bill may be proceeded with at this day's Sitting, though opposed, until any hour.—[Mr. Jopling.]

Question again proposed, That the Clause be read a Second time.

Mr. Buchan: I have tried to put my views forward in a moderate and conciliatory spirit. We should like the Government to redraft the clause, basing it on a formula related to the number of years' compensation. We think that there are different factors in agriculture which make the position of the agricultural tenant and any other kind of tenant not totally analogous.
We have to accept the clause and to thank the Government for bringing it forward. But we urge the Government to take heed of the serious criticisms that have been made.

Sir Frederick Corfield: I share with other hon. Members a wholehearted welcome for the purpose of the clause and a cautious response to the means by which it meets that purpose. It is not good enough to say that we will

leave this matter to the valuing profession. We cannot judge whether the clause will meet the problem adequately and without undue complexity until we know roughly what the valuation results will be. I suspect the concept of a notional lifetime lease, in part for the reasons put forward by the hon. Member for Durham (Mr. Mark Hughes), although I do not find a difference in compensation based on age necessarily offensive.
We are asking the valuer to assess the working life ahead of the farmer because that is the expectation of the lease. But there are other headings under which a valid notice to quit can be given under the Agricultural Holdings Act and the 1968 Act. The valuer also has to assess the probability or likelihood of one of these other headings coming into operation, the landlord taking advantage of it and succeeding in securing a valid notice to quit. That may result from a defect in the farmer—an inability to pay the rent, for example—or, under the 1968 Act, an estate management scheme which has nothing to do with the ability or efficiency of the farmer. The valuer presumably has to look at the whole estate and the character of the landlord to see whether he is likely to be able to serve a notice to quit under that head and, if so, whether he is likely to succeed. The same applies in relation to the hardship clause, also under the 196S Act. It is a virtually impossible task. There are so may hypotheses that one's mind boggles at the sort of cases that will come to the Lands Tribunal.
My right hon. Friend the Minister has stressed that he does not want to get away from market value. Although one may say this is analogous to a notional lifetime lease, the plain fact is that it is not a lease and it is not a marketable commodity. Although the tenant may persuade someone to give him a capital sum for vacant possession—generally the landlord—and may make mutual arrangements with a potential successor whom the landlord is willing to accept as tenant, he cannot market his security of tenure. There is no market value. Yet that is precisely what the unfortunate valuer is told to find out. That is a contradiction in terms. We are asking the valuing profession to do something that is wholly impossible. If that is not so, we must be told what valuation principles my right


hon. Friend has in mind so that we can judge the likely result.
Having said that about market value, there are two other side effects, both of which are undesirable. There is no doubt that the security of tenure provision in the Agricultural Holding Act, 1948, has had the result of landlords being reluctant to make land available to rent because the financial incentive to sell or take in hand is so very considerable. This puts yet another obstacle in the way of land coming on the market to rent, particularly if it has any development potential at all.
The second undesirable side effect is that we are now to have three parties to the compensation negotiations with perhaps the most bitter wrangling between landlord and tenant—and that, again, introduces something very undesirable and alien to the agricultural world.
My final comment is on the question of tax. Another very difficult problem that arises is that, as I understand it, compensation for an "interest" in land—I should put that in inverted commas for it is a very curious interest—is nevertheless a capital sum and any tax to which it would be subject would be capital gains tax. I have to ask my right hon. Friend where is the base? It is virtually impossible to go back to 1965 and to say what its value would have been then, to take the difference and to charge tax on that difference. Does one take it with the same tenant? Clearly, in 1965, eight years ago, the tenant was eight years younger so that the sum was different.
I suggest that we are getting into very deep water when we get to the problem of capital gains tax on a notional interest which is not marketable and has no conceivable basis on which one can decide where the gain started on which to fix the capital gains tax. For these reasons, although I welcome the purpose, I hope that my right hon. Friend will give us strong assurances that lie will take this clause away, even if it is passed tonight, with the firm intention of giving it a great deal more thought and the opportunity probably for quite substantial revision in another place where, fortunately, there are many Members who know quite a lot about the subject. I hope that he will take the advice of some experienced valuers and not merely dismiss the

proposed clause as something which valuers can work out when we have passed this astonishing proposition of market value for something which is not marketable.

Mr. R. J. Maxwell-Hyslop: I have not expert knowledge of this subject and I certainly derived benefit from listening to the speech before my own from my right hon. and learned Friend the Member for Gloucestershire, South (Sir F. Corfield), who has expert knowledge and practice in this field.
I would not for a moment claim that I know how to draft a clause which takes into consideration the factors I want briefly to mention to my hon. Friend. The first is, if we take a formula based on actual rent, as has been recommended in the course of the debate, it assumes for the equity of the proposition that there has always been a free, competitive market in agricultural tenancy—and we all know that this has not been the case. Paradoxically, to adopt such a formula would, I believe, work out inequitably for the reason that where a farmer has had a particular benevolent landlord—and quite often this has been the case—who has charged a low rent, a formula based on actual rent would mean that the farmer concerned got very little compensation although his loss would be greater because he would be going onto an open market with high rents, his agricultural economy being based on low rents to date. Therefore, the compensation he would get would be inversely proportional to the loss he was suffering. For that reason my hon. Friend has considerable wisdom in not flying to the easy alternative of adopting a formula based on actual rent, because the hypothesis that all tenants are paying open market rent is so manifestly untrue. I suggest to my hon. Friend that there is considerable wisdom in not adopting that as his criterion.
The age point has been referred to by my right hon. Friend the Father of the House among others. My only comment on that is that it is not immediately apparent to me why the age chosen is not that of the retirement pension qualification, namely 65. Why is it 60 rather than 65? There may be a good and convincing reason for it but it is not self-evident to me.
I take the point made by my right hon. and learned Friend about valuation. To gather together a quintessence of truth about events that are decided by market values is difficult enough. To gather together a quintessence of truth about that which does not exist must pass the frontier of the difficult and move into the realm of the impossible. If an arbitrary assumption is made I do not see how anyone can challenge before a tribunal on a basis of evidence that which is not based on evidence in the first place. I should have thought that it made the appeal procedure impossible where one pulls a figure out of the sky and sets against it another figure also pulled out of the sky. This must be the difficulty about a life interest.
I think that the only way to get round this is to take an actuarial expectancy of life—whatever that may be in a given year is ascertainable—take the annual open market rent, which can fairly be assessed by reference to other properties, subtract the tenant's age from the actuarial calculation of expectancy of life and multiply that by the annual rent, which is ascertainable. One is then judging on a basis of objective reality rather on figures taken out of the sky.
I am not proposing to argue whether those engaged in agriculture live longer than those engaged in other professions. One would have to take the statistical mean figure for expectancy of life, and I think that that would have some advantages, as long as we take as the base age 65, where there is this transition compensation provision, so that we do not accentuate still further the tendency in legislation to leave a gap between the age at which some sections of our law assume people will retire and the age at which, in pension law, people are provided with the wherewithal to do so.

Mr. John Farr: I congratulate my right hon. Friend and the Department generally on taking a big step towards improving the conditions for tenant farmers. I share the view expressed by other hon. Members that the amendments and this clause in particular are exceedingly complex. They are so complex that it must have taken a legal mind to produce them. I hope

that my right hon. Friend will not mind my saying so.
Subsection 2(a) provides that the landlord's rights are to be disregarded. Does this mean that the landlord will or will not be given the payment which he would have received in a compulsory purchase?
10.15 p.m.
I share the views which have been expressed about the complexity of the way in which the Minister has gone about doing a very good job. However, in my view the provision will cause hardship, suffering and considerable distress among people who will not be prepared to accept a district valuer's figure and who will go to the Lands Tribunal. I believe that bitterness will be caused when it is discovered that the clause will mean that the nearer a farmer gets to retirement age, the smaller will be the compensation he receives. Certainly the older the farmer, the less will he be able to go in for retraining. He will be less adaptable, he will have less chance of taking on a new farm and yet he will receive a lower amount of compensation. If the clause is enacted as drafted, considerable stress will be caused in the farming community, especially among, tenants.
The Minister has accepted the principle that tenant farmers need better compensation. I hope that he will give an undertaking that he will take note of the views that he will receive in a few days when the Bill goes to another place. I know that he will receive many representations from those who require this matter to be dealt with in a simpler way, namely by amending Section 12 of the 1968 Act to reduce the period from four to 10 years so that everybody will be able to see what is being done.
May we be told whether these provisions are to be retrospective? The Under-Secretary of State referred to a couple of judgments which were now to be set aside. That would indicate that there is something of a retrospective measure in the clause. How far will it go back? Will it go back to cover the case of the farmers of Empingham in Rutland who not so long ago were dispossessed because of the building of a reservoir?

Mr. Gwynoro Jones: The one thing that is clear is that the existing legislation affecting tenants' compensation is inadequate. Discussion and questioning of the new clause does not mean that we are seeking merely to undermine what the Minister is trying to do. However, I hope that we shall receive assurances that in "net" terms this provision will mean increased and better compensation for the tenant farmer than has been the case hitherto.
It is not good enough for the Minister to come to the House and say "The whole matter is now in the hands of the district valuer and, therefore, it is out of our hands." Many tenant farmers will be concerned at the complexity of the new system. The farmer will not be sure what these provisions will mean in terms of actual compensation. Under Section 12 of the Agriculture Act 1968 the basis for consideration was a four-year period. That is now deductible from the farm loss payment and the farm loss payment is taxable. Although on the one hand the Minister says that he is giving better compensation in terms of the farm loss payment, on the other hand he is taking away the figure based on four years' rent which obtained under the 1968 Act.
I trust that the Minister will realise that many of us are not happy that the district valuer is possibly being made the be-all and end-all in this case. As the hon. Member for Harborough (Mr. Farr) said, many cases will have to go to the Lands Tribunal since problems will arise due to the complexity of the scheme. I trust that the Minister will tell us in his reply on what sort of basis he will expect the district valuer to assess the compensation level for the tenant farmer.
The suggestion by the National Farmers' Union of the amendment to Section 12 of the 1968 Act increasing the period from four to 10 years sounds a simple and perhaps a better method, but that is not the solution in the case that has been mentioned already in which the tenant pays a lower rent than the present market rent. Merely to increase the number of years on a low rent basis will not solve the problem. What will the district valuer do? Will he base it on the existing rent or the existing market rent, or is the increased cost of land to be introduced? Clearly this will affect the level of compensation immensely.
For instance, if the value of land is to be in any way a part of the compensation factor, I must point out that in my constituency, Carmarthenshire, since March 1970 the value of agricultural land of up to 49 acres has increased by 30 to 35 per cent., and for a farm of 300 acres the value has increased by over 100 per cent. Surely the Minister will give guidelines to the district valuer. He must tell us whether he will give a basis on which the district valuer can work out a satisfactory scheme.
On the question of age, some hon. Members on the Government side have tended to agree that age should be taken into consideration when assessing the tenant's compensation. Clearly the younger tenant would be faced with major problems if he had to vacate a farm because a compulsory purchase order was made. That is self-evident, but at least there would be opportunities for him due to his age. But at the other end of the scale the tenant farmer in his fifties will be put in an intolerable, indeed impossible, position. If he is to lose his occupation after spending 30 or 40 years in the industry, it is quite clear that his opportunities to get any other occupation will be extremely limited. I can certainly say that for my part of West Wales. At the present moment I cannot think of many occupations that a tenant farmer in his fifties would be able to go into, yet his compensation payment would be lower. I am sure that the older tenant farmer will be disturbed that he will get less than the younger farmer.
On this point also, is the district valuer to make an assessment of the contribution of the older tenant farmer to agriculture over the 30 or 40 years that he has been a tenant farmer? Is this to be included in the assessment which the district valuer will make? Clearly it is important.
Many other points have been raised which I do not wish to reiterate, but there is one point on which I should like the Minister to give an assurance tonight. At the end of the day, is the Minister satisfied that under the clause no tenant farmer receiving compensation will be worse off than under the old scheme? I trust that the hon. Gentleman will be able to tell us this and so put at rest the minds of many worried tenant farmers.

Mr. Eldon Griffiths: It may be helpful if I give the hon. Gentleman that assurance now. No tenant farmer will be worse off on this account.

Mr. Jones: That is good news. I trust that that will prove to be the case.
I still doubt whether at the end of the day this will be a satisfactory level and the sort of compensation to which tenant farmers are entitled. That is another matter. However, I accept the Minister's assurance that no tenant farmer will be worse off under this scheme than under the previous scheme.

Mr. Buchan: It would also be useful to know how, under the new clause, it is established that no tenant will be worse off.

Mr. W. Benyon: I wish to echo the confusion surrounding this new clause. When even lawyers do not understand a matter it behoves lesser mortals to tread very warily.
It would be churlish, however, not to welcome it. I asked for it on Second Reading and now we have it. But, like other hon. Members, I seek a little more clairfication about what is involved.
My hon. Friend the Under-Secretary has made it clear that age will be taken into account. The hon. Member for Carmarthen (Mr. Gwynoro Jones) has a very valid point here. I am not happy that a younger farmer should receive greater compensation than an older one. In a sense it goes completely contrary to the redundancy Acts. In any event it is a very difficult method of valuation.
It would be very helpful if we could be given an actual example, taking the case for instance of a farmer aged 30 whose annual rent is £1,000. I do not suggest that that be done now, but perhaps it could be done when the Bill is considered in another place.
We must also have clarification on the taxation aspect. Taking again a tenant with a yearly rent of £1,000, the present compensation is six years' rent. That means a total of £6,000, £4,000 of which is tax-free with the remaining £2,000 taxed. But let us suppose that under the clause the total gross compensation is £7,000. It that is all taxed, the tenant will be in a very much worse position.

It appears from subsection (6) that such a possibility is envisaged, and we need clarification.
I also wish to echo what has been said about subsection (5). The four years' additional rent was a reorganisation measure. It should not be confused with the pure compensation aspect.
However, my chief purpose in intervening in the debate is to draw attention to the position of landlords, and here I must declare my interest since I am the landlord of let agricultural land. The clause has not been sufficiently thought out in relation to agricultural tenure in this country. I am glad to see my lion. Friend the Parliamentary Secretary to the Ministry of Agriculture, Fisheries and Food present. At the moment, everything militates against a landlord letting a farm when it becomes vacant. Not only does he lose, in effect, possession for the lifetime of his tenant, but the value of the land drops substantially on letting. Now the Government are saying that if land is purchased compulsorily the owner will receive less compensation if he has let the farm than if he had farmed it himself.
I cannot believe that this matter has been fully thought out as it affects agricultural tenure. This is another nail in the coffin of the tenant farmer system which is coming more and more into its own because of the greater capital formation in agriculture and the need for a tenant farmer to have that assistance in dealing with modern systems of agriculture.
In Committee my hon. Friend said that he would seek
to provide that compensation for acquisition by a public authority should take into account the fact that an agricultural tenant has, in effect, permanent security of tenure".
Later he said that lie proposed,
to treat the tenant farmer more nearly like the owner-occupier."—[OFFICIAL REPORT, Standing Committee A, 25th January 1973; c. 319.]
In effect the tenant farmer has security of tenure, but not in law, as has been pointed out by a number of right hon. and hon. Members. He has the expectation of security for life, but this is subject to a number of factors: paying his rent, farming the land properly, the fact that the owner can get possession for development purposes and so on. Therefore, he


has not got security for life in the same sense as a lessee of a business. This matter was considered extensively in the House of Lords decisions about which we have heard. The ramifications are therefore very wide indeed. I hope that my hon. Friend will listen to any suggestions which are made when the new clause is considered in another place.
The farming organisations have welcomed the new Clause and the Bill but have pointed out that the owner-occupier is still entitled to more compensation, even after the concessions granted in the Bill, because of the loss of livelihood which is involved. The fact that 70,000 acres are being taken out of agriculture each year means that it is more and more difficult to get another farm. In the opinion of the farming organisations it is wrong to rob Peter to pay Paul to get a better deal for the tenant farmer. I hope that this matter will be considered carefully, not necessarily tonight but when the Bill is in another place.

Mr. Eldon Griffiths: The majority of hon. Members who have spoken have welcomed what my right hon. Friend is trying to do. However, the welcome offered by the hon. Member for Durham (Mr. Mark Hughes) would have fooled me.
My right hon. Friend and I regret the short time between the tabling of amendments and the debate but I hope that the House will forgive us when I explain the situation. There is a lot of pressing business with which the House will have to deal. My right hon. Friend had the choice whether to try to bring the Bill forward quickly in order that the improved compensation should become available to people across the country as rapidly as possible or to allow it to take its place in the queue of other legislation that the House will have to consider, which might have resulted in the Bill not being taken for some weeks or even months. Faced with that choice, I believe that my right hon. Friend was right to bring the Report stage of the Bill before the House tonight.
My right hon. Friend has a well deserved reputation for reasonableness and an anxiety to help the House. We shall take very careful note of what has been said tonight and, if possible, will in some way produce a simpler, clearer way

of achieving the purpose that right hon. and hon. Members on both sides of the House want for tenant farmers and, indeed, for other farmers who are dispossessed. My right hon. Friend will be the first to wish to do that, but this matter involves an exceedingly difficult legal and drafting problem. On the basis of what has been said tonight we shall consider whether we can improve the drafting to achieve in another place the purpose that we all want.

Mr. Charles Morrison: I am pleased about what my hon. Friend has said. Will he take most careful regard of representations which are made to him, particularly by the National Farmers' Union and the CLA?

Mr. Griffiths: Certainly, we have taken these carefully into account.
Of the many points raised by my right hon. and learned Friend the Member for Gloucestershire, South (Sir F. Corfield)—who speaks with great authority on these matters—there are two on which I should try to give him a direct reply. The landlord and tenant will not be in competition for the compensation. The interests of both are treated separately in the Bill, and this has always been the case. Secondly, capital gains tax is chargeable only on gains and not on receipts. The compensation for the dispossession of a tenant will be taxable on the basis of the market value of the tenancy when it was acquired by the tenant and when it was disposed of to the acquiring authority.
I take my right hon. and learned Friend's point that we are asking a great deal of the valuing profession. On the advice available to me, however, I believe that the members of that profession will in most cases be able to cope.
The hon. Member for Carmarthen (Mr. Gwynoro Jones) was upset because my right hon. Friend was not providing guidelines to the valuers. He said he was worried that the business of determining compensation would go out of the Minister's hands. I hope he is not suggesting that the valuers should be subjected to ministerial interference. That would be a most extraordinary proposition. I should be very worried if the decisions of the valuers were in the Minister's hands.
Furthermore, the hon. Member must know that these matters are not in any


case in the hands of one valuer. In practice there are at least two valuers. There is the valuer of the acquiring authority and there is the valuer who is provided for the tenant or for the other person who is losing his property. The hon. Gentleman will know—perhaps he does not—that the tenant has his fees paid for him and he is not simply in the hands of the district valuer.

Mr. Gwynoro Jones: I am fully aware of that system. The Minister knows that I was not suggesting that his right hon. Friend should interfere in these matters. Equally, he will have to accept that the scheme that he is proposing is a complex one, which many tenant farmers will find it difficult to follow. It will cause not just anxiety but certainly irritation, with cases being brought before the Lands Tribunal.

Mr. Griffiths: The hon. Member persists. No doubt he can cause a certain amount of irritation and confusion. But let us be clear what the valuer does. He either operates on a rent formula or he works out the profitability of the land. The valuer is perfectly capable of doing that.
I was asked whether disturbance payment would be forthcoming in the case of farmworkers being made redundant as a result of land being taken. This was raised by an hon. Member on the Opposition side. If as a direct result of the scheme—a highway or whatever it is—a farmworker is made redundant and becomes entitled to a redundancy payment from his employer, his employer—the farmer—can claim reimbursement under the disturbance provisions of the Bill. That would be paid.
My right hon. Friend the Member for Thirsk and Malton (Sir Robin Turton) raised, first, a small point about agricultural tenants holding year by year. I am advised that they will not be eligible for farm loss payments. It may be that my right hon. Friend was concerned about the 364-day tenant, who has been mentioned to me by other hon. Members. I shall look at this matter again with my right hon. Friend. It may be that if something further needs to be done in respect of farm loss payment for the 364-day tenant, we shall consider whether anything can be done in another place.

Mr. Mark Hughes: A lot of tenant right has been the custom and usage of the country for generations. Annual tenancies have been in usage in parts of the country for a very long time, long before the 1946 legislation. Therefore, to deny farm loss payment to the annual tenant is to go against a lot of ancient custom.

Mr. Griffiths: I have just said that we shall take note of this matter. I now wish to come to the very important points raised by my right hon. Friend the Member for Thirsk and Malton.
The central point is that my right hon. Friend and others appeared to interpret subsection (5) as having the effect of denying to a tenant farmer the four times rent payment under Section 12 of the Agriculture (Miscellaneous Provisions) Act 1968. This is a misconception. I hope that I can explain why that is so.
Section 12 of the Agriculture (Miscellaneous Provisions) Act 1968 remains in force. It is not affected by the Bill. Tenants will, therefore, continue to receive four times the rent as a non-taxable payment. There is no question of tax being paid on that sum. There is nothing in subsection (5) which removes this benefit. Section 12 remains.
The reason why, under subsection (5), the deduction of a sum equal to four times rent payment is mentioned is, first, so that a proper comparison can be made between the compensation a tenant would get under the present law and the compensation he would get under the new arrangements. It is solely for the purpose of enabling a comparison to be made to see which one is the better.
The second reason is to ensure that the tenant is not paid compensation on the basis of his security of tenure, which is the new thing, in addition to four times the rent. It would be inequitable to pay twice. After all, the latter payment, four times the rent, was enacted precisely to make up for the limited security of tenure which was available for compensation purposes previously.

Sir Robin Turton: The 1968 Act specifically stated that the four years' payment was for the reorganisation of the tenants livelihood, and nothing on good will.

Mr. Griffiths: The object there was to make up for the limited security that was available to him.

Mr. Mark Hughes: No.

Mr. Griffiths: I shall come to this point. Now that security of tenure is to be fully taken into account in the future and the Section 12 payment is to continue, it is clearly right that one must be set off against the other. There cannot be much argument about that. As the Section 12 payment will continue to be made, it follows that an equivalent amount must be subtracted from the compensation as assessed. Let me make this clear. The Section 12 payment will remain non-taxable. It is only the compensation which will attract tax.
I am grateful to the hon. Member for Renfrew, West (Mr. Buchan) for remaining in the Chamber. I know that he is present against some difficulties. He will remember that in Committee I gave an undertaking that we would attempt to provide the tenant with an option, whether he wishes to be compensated under the agricultural holdings legislation or under the compulsory purchase legislation.
10.45 p.m.
On the whole the compulsory purchase legislation is the more generous. We examined how to fulfill this undertaking and to provide an option, but if we had had an option it would have involved the tenant in two notional calculations. He would have had to work out first the agricultural holdings result or, alternatively, the compulsory purchase result. It would have meant that two very different calculations would have had to be made by someone who might find those calculations very difficult. It would have left the tenant in uncertainty and with no firm basis on which to make a judgment. We decided to be rather more generous. In other words we decided to give the tenant not simply two options, but a guaranteed base of what the law would allow him at present, whatever the outcome of the new arrangements in particular cases. In other words we have provided a floor, and that is the purpose of subsection (6).
The subsection ensures that in no circumstances will the tenant get anything less than he gets at present. He might well get more, or even substantially more. I am advised in a number of hypothetical cases that I have examined that there will be cases in which the tenant will get a very great deal more as a result of the

clause. In no circumstances can he possibly get less, because of the guarantee in subsection (6).
In future the tenant will never need to worry about losing out because he does not have the so-called option. The tenant farmer will not be worse off. The major point is that the clause has been so drawn that he cannot be worse off and the four-times rent payment will not be taxable, only the compensation elements will be.

Mr. Buchan: At this stage I do not want to get involved in a close analysis of the net or gross tax position and so on, but the point remains that in spite of what he says subsection (6) will be an equivalent of option, except that the tenant will get the better of the two things from which he could have chosen. But that does not invalidate the point that that kind of proposition involving an option with two notional concepts could have been on a simpler form of calculation along the lines that I suggested tonight. Also it could have been possible to have left in the option to go for the local Government type of legislation and therefore the option, with a basic simple formula, would have remained. In spite of the Minister's reply, I hope that he will still promise to look at the arguments that have been deployed here tonight.

Mr. Griffiths: I am glad to do that, but if the options that the hon. Member has suggested were put into the Bill the compensation would all be taxable, whereas in the manner that the Government have set out the clause there is no question of the four-times rent payment being taxable. Only the compensation elements will be taxable.
Therefore I must ask the House to accept the assurance that my right hon. Friend and I, bearing fully in mind the views that have been expressed by the agricultural interests, bearing in mind as well our duty to have regard to the public funds that are being used, and the principle of market value, to which we are adhering, will take full account of what has been said tonight. We shall see whether it is possible to set out the purpose we all seek to achieve in a simpler manner. I give no guarantee of that, but my right hon. Friend and I shall try so to do.

Question put and agreed to.

Clause read a Second time, and added to the Bill.

Mr. Deputy Speaker (Sir Robert Grant-Ferris): I have a short explanation to make. It appears that a printing error has crept in. New Clause 15 on page 172 of the Notice Paper should not be there. It should be at the bottom of page 168. If anybody is sufficiently interested to ask the reasons, I am prepared to give them, but I do not want to waste the time of the House.

The Minister for Local Government and Development (Mr. Graham Page): It will all be solved by your selection of new Clause 15 to be discussed with new Clause 2, Mr. Deputy Speaker.

Mr. Deputy Speaker: That may be, but the right hon. Gentleman has the right to have his clauses selected in any order that he chooses, being the Member in charge of the Bill. However, we shall take it now with new Clause 2 for debate, and then when we come to it on that later page I shall have a decision from the House upon it in the new order.

New Clause 2

INTEREST ON COMPENSATION FOR INJURIOUS AFFECTION WHERE NO LAND TAKEN.

'(1) Compensation under section 68 of the Lands Clauses Consolidation Act 1845 or section 10 of the Compulsory Purchase Act 1965 (compensation for injurious affection where no land taken) shall carry interest, at the rate for the time being prescribed under section 32 of the Land Compensation Act 1961, from the date of the claim until payment.

(2) Compensation under section 6 of the Railways Clauses Consolidation (Scotland) Act 1845 (compensation for injurious affection where no land taken) shall carry interest, at the rate for the time being prescribed under section 40 of the Land Compensation (Scotland) Act 1963, from the date of the claim until payment'.—[Mr. Graham Page.]

Brought up, and read the First time.

Mr. Graham Page: I beg to move, that the Clause be read a Second time.

Mr. Deputy Speaker: We are to discuss at the same time Government new Clause 15 and Government Amendments Nos. 58, 60 and 68.

Mr. Page: This group of new clauses and amendments deals with interest payable on compensation payments or pay-

ments similar to compensation payments. Interest is payable on straightforward compensation but not on certain other payments for which we have provided in the Bill. Under new Clause 2, interest will be payable on injurious affection, and under new Clause 15 for the injurious affection claim which may arise out of Part I of the Bill.
Under Amendment No. 60 interest will be payable on farm loss payments, and under Amendment No. 68 it will be payable on disturbance payments.
We have then covered all except the home loss payments. As they are payable within three months of the claim, we did not think it proper to provide for interest on them, as it would be such a small sum.
In going through these items I have discovered that there may be one more for which we should provide. No interest in law is payable on well-maintained payments, so we may wish to make an addition in another place to clear the whole question up.
One other point concerns the second leg of Amendment No. 60 and of Amendment No. 58, which is a paving amendment for it. That second leg deals with the claim period for a farm loss, which is one year from displacement. By the amendment we shall extend the claim period for one year from Royal Assent for a farmer who has been displaced between 17th October last and the Royal Assent.

Mr. Frederick Mulley: I thank the Minister for the amendments, which meet a point I put far less elegantly but far more briefly in an amendment that sought to do everything in one go instead of four or five.
I see the argument for not including home loss payments, but in his further reflections on the Bill perhaps the right hon. Gentleman will bear in mind that with the present record rates of interest three months' interest could be quite a large sum. The Bill makes no provision for the case where the local authority might be in default of its obligation to pay within three months. Most local authorities will seek to observe the letter and spirit of the law, but the Bill provides no penalty if, for whatever reason, a payment is not made in three months.


If the claimant had to sue, it would take quite a time.
The Minister might like to consider this as well as the other matter he has under taken to consider before the subsequent stages.

Mr. Julius Silverman: What is the present prescribed rate of interest?

Mr. Graham Page: I cannot tell the hon. Gentleman off the cuff. There is an order about once a month altering the rates of interest. They come before me but I cannot memorise them, particularly as they are in three columns for long-dated and short-dated loans and so on.

Question put and agreed to.

Clause read a Second time and added to the Bill.

New Clause 4

NORTHERN IRELAND

'(1) Her Majesty may by Order in Council—

(a) extend this Act (other than Part V thereof), with such additions, exceptions and modifications as appear to Her Majesty to be expedient to—

(i) the provision, operation, management or use of public works in Northern Ireland under any enactment relating to a matter in respect of which the Parliament of Northern Ireland does not have power to make laws (in this section referred to as "a reserved enactment"); and
(ii) acquisitions of land in Northern Ireland by any department or body exercising powers of acquisition under a reserved enactment;
(b) apply, with such additions, exceptions and modifications as appear to Her Majesty to be expedient, the provisions of Schedules 5 and 6 to the Roads Act (Northern Ireland) 1948 or Schedule 6 to the Local Government Act (Northern Ireland) 1972 to the acquisition, otherwise than by agreement, of land in Northern Ireland by any department or body exercising powers of acquisition under a reserved enactment.

(2) An Order in Council under this section may include such provisions as appear to Her Majesty to be incidental to or consequential on any provision contained in such an Order by virtue of subsection (1) above.

(3) An Order in Council under this section may be varied or revoked by a further Order in Council made thereunder'.—[Mr. Graham Page.]

Brought up, and read the First time.

Mr. Graham Page: I beg to move, That the Clause be read a Second time.

Mr. Deputy Speaker: At the same time we shall also discuss Government Amendment No. 100: In page 72, line 10, after 'Act', insert 'except section (Northern Ireland)'.

Mr. Graham Page: Yes, Mr. Deputy Speaker. Amendment No. 100 is consequential on new Clause 4.
New Clause 4 arises out of the following position. As long ago as 1962, during the debate on the Northern Ireland Act in another place, the then Lord Chancellor gave an undertaking that, in the matter of acquisition of property, owners in Northern Ireland would receive treatment no less generous than that received by owners in Great Britain. This undertaking was reaffirmed following publication of the White Paper, and it is in order to apply the compensation provisions of the Bill to Northern Ireland that this new clause is introduced.
Unfortunately, we cannot just say that the Bill shall apply to Northern Ireland because there are certain complications over compensation. Some provisions have already been introduced in Northern Ireland and we have to dovetail the Bill into the existing law of Northern Ireland. The House may think that we have taken a rather cowardly way of doing it, but it is a solution at any rate. By using the device of an Order in Council, we shall have time to work out how to dovetail the one law into the other.

Question put and agreed to.

Clause read a Second time and added to the Bill.

New Clause 15

INTEREST ON COMPENSATION UNDER PART I

'(1) Compensation under this Part of this Act shall carry interest, at the rate for the time being prescribed under section 32 of the Land Compensation Act 1961, from—

(a) the date of service of the notice of claim; or
(b) if that date is before the beginning of the claim period, from the beginning of the claim period, until payment.

(2) In the application of this section to Scotland for the reference to section 32 of the said Act of 1961 there shall be substituted a reference to section 40 of the Land Compensation (Scotland) Act 1963'.—[Mr. Graham Page.]

Brought up, read the First and Second time, and added to the Bill.

New Clause 5

LAND AFFECTED BY NEW STREET ORDERS

'(1) Section 191(1) of the Act of 1971 shall have effect as if the land specified therein included land which—

(a) is land within the outer lines prescribed by a new street order made by the appropriate council under section 159 of the Highways Act 1959; and
(b) is within the curtilage of a dwelling house in existence or under construction immediately prior to the date on which the intention to make the order was first notified in accordance with subsections (2) and (3) of section 159 of the said Act of 1959.

(2) Subsection (2) of section 202 of the Act of 1971 shall apply to an objection to a blight notice arising under subsection (1) above as it applies to an objection relating to a hereditament on the grounds mentioned in section 194(2)(c) of that Act'.—[Sir F. Corfield.]

Brought up, and read the First time.

Sir F. Corfield: I beg to move, That the Clause be read a Second time.
The purpose of the new clause is to meet the point ably put by my hon. Friend the Member for Scarborough and Whitby (Mr. Michael Shaw) in Committee as an amendment to Clause 49. My right hon. Friend then kindly promised that he would consider the point, and indeed he has told me privately that he will go further and is prepared to devise more suitable words to meet it. I was never optimistic enough to think that the jealously of the parliamentary draftsmen for the arts they practice would permit the new clause to go through, although it is rather better than their efforts in New Clause 1.
However that may be, I am immensely grateful to my right hon. Friend. New Clause 5 deals with a fairly rare form of blight, but it is a real blight when it applies. It arises under new street orders, many of which are made and not acted on for many years, and can produce hardship. I assume that my right hon. Friend will confirm his acceptance of the principle and will promise to produce a more suitably drafted clause. If that is so, I will leave the matter there.

11.0 p.m.

Mr. Graham Page: I am grateful to my right hon. and learned Friend the Member for Gloucestershire, South (Sir F. Corfield) for drawing our attention to this. The House might be interested to

know that this has a personal history for my right hon. and learned Friend and myself. When I started to research into this I found that we had been debating this together as long ago as 1959, late at night on the Highways Bill of that time. I have sympathy with all the principles he has embodied in the clause. I go further and say that I have sympathy with every detail. We have to get the wording right. Neither he nor I would presume to do it without the assistance of the parliamentary draftsmen and I know that I will have it right by the time the Bill reaches another place.

Sir F. Corfield: On the basis of that assurance I beg to ask leave to withdraw the motion.

Motion and Clause, by leave, withdrawn.

New Clause 6

ALLEVIATION OF HARDSHIP ARISING IN CERTAIN CASES WHERE COMPENSATION FOR OWNER-OCCUPIED RESIDENTIAL PROPERTY IS LESS THAN FULL OPEN MARKET VALUE

(1) Where a local authority acquires owner-occupied residential property which forms part of an area of town development (as referred to in Part I of Schedule 1 to the Land Compensation Act 1961), and where the compensation payable is less than full open market value, then, subject to the provisions of this section, the local authority acquiring the property may (if so required by the vendor) provide an interest free loan to the vendor not greater than the difference between the compensation paid and the full open market value of the property acquired by the local authority.

(2) The said loan shall only be made if and when the vendor completes the purchase of a replacement residential property for his own occupation within two years of the completion of the acquisition of his property by the local authority.

(3) The replacement property shall be situate in the vicinity of the acquiring local authority.

(4) The said loan shall not in any case exceed 90 per cent. of the value of the replacement property which value shall be assessed and certified to and at the expense of the authority by a competent professional valuer to be instructed by the authority.

(5) The said loan shall automatically become a charge on the replacement property and must be registered as a Land Charge against it or, in the case of Registered Land, recorded in H.M. Land Registry.

(6) The said loan shall be repaid—

(a) if the vendor ceases to reside in the replacement property;


(b) on the death of the survivor of the vendor and his spouse:

Provided—

(a) that if the vendor ceases to reside in the replacement property, in circumstances where he sells it and within 12 months completes the purchase of another replacement property within the vicinity then the local authority which first acquired the original property shall on request grant another interest-free loan within the terms of this section which shall thereupon become a charge on the property under this section and be subject to the other provisions of this section;
(b) the replacement property may itself be replaced as contemplated in this proviso without limit to the number of occasions until the death of the survivor of the vendor and his spouse.

(7) In cases where the property acquired by the local authority is occupied by the vendor partly for business and partly for residential purposes the interest-free loan shall be granted in proportion to that part of the whole property which is occupied for residential purposes only.

Any apportionment of value for this purpose shall be decided in the manner provided in subsection (8) of this section.

(8) The full open market value of the property acquired shall be as may be agreed between the parties or in default of agreement as settled by an arbitrator under the provisions of the Arbitration Act 1950 (as amended at any time) or under any enactment replacing the same.

An Arbitrator under this section shall be appointed by agreement between the parties or in default of agreement by the President for the time being of the Royal Institution of Chartered Surveyors.—[Mr. David Mitchell.]

Brought up, and read the First time.

Mr. David Mitchell: I beg to move, That the clause be read a Second time.

Mr. Deputy Speaker (Sir Robert Grant-Ferris): We can at the same time discuss new Clause 12—Compulsory Acquisition under Part III of Housing Act 1957.
'Notwithstanding anything in this Act to the contrary, where there is a compulsory acquisition of property under the provisions of Part Ill of the Housing Act 1957 and the value of that property has been reduced by the acquiring authority in exercising its discretion in favour of dealing with the property under section 43(l)(b), then the difference between the market value of the site cleared by the owner under a clearance order in accordance with section 43(1)(a) and available for redevelopment and the cleared site value shall be disregarded for the purposes of compensation'.

Mr. Mitchell: It has been a recent feature of population movement that people have moved from the city centres, partly through natural migration, partly as a result of new towns and partly because of expanded town growth follow-

ing the 1952 Town Development Act. Perhaps I could describe briefly what the problem is, illustrate it with a constituency case and explain how this clause would work.
It is a fairly lengthy clause. I must express my gratitude to the solicitor concerned for helping me draft it. In an expanded town, as extra land is required, it is taken by the council and already contains houses. The compensation is paid out under the 1961 Act. The basis of compensation is upon what the value would have been if the town had not been an expanded town. That is, the increased value arising from the expansion is disregarded in arriving at the figure of compensation.
I can understand the justification for this. If a local authority suddenly gave planning consent for a farmer's field to be used for housing in a new town the value of the land could increase from perhaps £900 or £1,000 an acre to £40,000 an acre overnight. It is understandable that the owner ought not to get this sudden vast accretion of wealth as a result of something which the public had done, in which he had no part.
Here we are dealing not with new towns built in green fields but with towns which are expanded. The site on which most of the expansion takes place already has housing on it. This is where the injustice comes, because the amount of compensation would be sufficient, with a town such as Basingstoke, to buy an equivalent property in Salisbury or Shepton Mallet or perhaps Hope Cove, but it would not be enough to allow a person to buy a replacement property in Basingstoke. In Basingstoke it will cost probably £3,000 or £4,000 or maybe more, beyond the amount of compensation paid to buy an equivalent property.
The reality is that a large number of people find themselves with a lump sum of compensation which is totally insufficient to buy another house in the area. That is all very well for those who want to move, but often people do not want to leave their friends and their work. They may have relatives there, they may be on the verge of retirement. I do not subscribe to the poetic picture of retirement to a little grey home in the West, which means that a person is bereft of all his friends, familiar sites, the local pub and the like.
If a person wants to stay where he is, he may be unable to do so because of the procedure enshrined in the 1961 Act. The clause is designed to deal with this problem. It is designed in such a way that it will advance a loan to make up the difference. It is easy to argue that if people were given the whole of the money at full market value, enhanced by town expansion, they would probably buy a house somewhere else worth a great deal more. But if they want to stay in the area, it is right and fair to give them a loan interest-free, for as long as the householder or his spouse survives, to allow for the difference. It would enable them to buy an equivalent property to that in which they are living.
The clause has been carefully prepared and contains adequate safeguards. The amount to be advanced is to be not more than the difference which has been lost. The person whose property has been compulsorily purchased must buy another property within two years; it must be within the vicinity of the original property and in the same locality. The money will he secured by a charge on the property and will have to be repaid when the man moves out of the area altogether or dies, or when his surviving spouse has died.
A number of other safeguards have been carefully built into the clause, and I hope the Minister will be able to accept it. If an acquiring authority has compulsorily to purchase somebody's home the least it can do is to make sure that the person is no worse off for the rest of his life. No amount of money can compensate for the garden that has gone, the roses and fruit trees that have been cared for over the years—the sort of things that make a home a home and the memories that go with it. That cannot be replaced, but what society can do is to see that people are not worse off. And as the situation now stands, if somebody's home in an expanded town is compulsorily purchased, they will he worse off unless they move outside the area. Therefore, I hope the Minister will accept our suggestion.
There has been a slight difficulty since the clause originally appeared on the Amendment Paper. The present provision contains the word "may" and at one time it included the word "shall".

Unfortunately, the word "shall" disappeared during the night, and we are left with the provision in the form in which it now stands. If the Minister prefers the version that is not on the Amendment Paper, I hope be will he able to give an undertaking to accept something like it when the Bill goes to another place. On the other hand, I shall he reasonably happy if he can accept it in its present form.
I turn to new Clause 12. I understand that new Clause 13 has not been selected. Perhaps the title "Prevention of Legalised Robbery" was a little too explicit for the liking of the House, and certainly of the Government, or perhaps "13" is just an unlucky number.
Perhaps I may explain the situation that has arisen. One of my constituents, a Mr. Albert Clifford, owns the freehold of No. 17 Jubilee Terrace, Frome, Somerset. I understand that he lived in this house when he worked as a dustman for the Frame Council some years ago. He got a better job and let the house to a lady who is 20 years older than himself——

Mr. Deputy Speaker: I am sorry to interrupt the hon. Gentleman, but does this refer to new Clause 12 or to new Clause 13?

Mr. Mitchell: It refers to new Clause 12. I am sorry if I did not make myself clear. New Clause 12 was carefully drafted on legal advice to cover the point which is expressed in layman's language in new Clause 13, a provision which we are not discussing. Therefore, I am speaking to new Clause 12.
It should perhaps be made clear that the two clauses cover the same ground. My constituent moved out of that house and let it to a lady 20 years older than himself. He knew that in the effluxion of time he would have the opportunity when he retired to move back into that house and spend the rest of his days there. The cost of the house would be in the region of £2,000, but that is not the point—it was the home he was looking forward to having. Then there entered on the scene the villain of the piece in the form of Frame Urban District Council. Let us be clear that the council acted quite legally. It was within the law, but I seek to have the law altered. Whether the council was morally right is


a different question. At the end of the day my constituent, Mr. Clifford, has no house, but an offer of £66·75p. That is as near to legalised robbery as anything can go.

Mr. Deputy Speaker: Order. The hon. Member ought not to talk about "legalised robbery", because that is in the title of the clause which has not been selected.

Mr. Mitchell: New Clause 12 in fact covers a method by which a local authority is able to acquire land in the way I am about to describe in detail, and I believe the description to which you referred would fit very adequately the transaction I am trying to prevent by new Clause 12.
The council condemned the property. The reasons are interesting. It was unfit for human habitation. Some of the reasons given for that would be laughable if they were not serious—such things as a loose tread on the staircase and a broken sashcord—but there are matters of greater importance. The council satisfied itself that the best way to deal with the problem was to demolish the house under compulsory purchase. If the house were in Chelsea it would have been whitewashed and sold for £20,000.
Here is the rub. The local authority served a compulsory purchase order. Mr. Clifford offered to negotiate a fair price before compulsory purchase, but the offer was refused. Under the 1969 Housing Act he was entitled to "acquired site value", but the council then proceeded artificially to reduce the acquired site value by refusing to allow any rebuilding on the site and saying that since this site on its own was too small to be allowed planning consent for rebuilding it should be revalued on the basis of no future use at all. Any developer buying five sites, as the council was doing, would have assembled for himself a very valuable site.
I turn to the mechanics of this matter. The Council buys this land at £3,600 an acre, and demolition costs are, say, £10,000, so the total costs are about £13,600. Bearing in mind that the council stated its reasons for wishing to carry out this activity, I quote from the Frome (Jubilee Terrace) No. 1 Housing Compulsory Purchase Order:

The council has been guided in its decision to purchase by such matters as the potentialities of the site for redevelopment, and the need for new houses in the district and the improbability of the area being satisfactorily redeveloped by private owners.
It is the council's duty as local housing authority to consider housing conditions in their district and the needs of the district with respect to the provision of further housing accommodation and further to prepare and submit proposals for the provision of new houses.
On that basis the council has purchased this site whose site value is about £25,000 per acre and is paying £13,600 and therefore making a cool profit of £11,400 an acre.
By a procedure which is legal, but which I believe the House should not allow to continue to be legal, the council has acquired a house, demolished it and paid the owner £70. It cannot be right that someone looking forward to a home to which to retire should, by this kind of subterfuge, find that he is without a home and only £70 in his pocket. If a local authority acquires property by compulsory purchase it ought not to be able to gain from any diminution in the value of that property which it has brought about by its own actions.

11.15 p.m.

Mr. R. A. McCrindle: I support the clause and recommend it to the Minister. I propose to underpin my support for it by raising a constituency matter. I represent a constituency where new town development in the past and potential Maplin motorways in the future have made the question of land compensation a burning topic and caused a great deal of heartache.
The main bone of contention is that open market values for what are often substandard properties are inadequate to allow the purchase of similar sized accommodation in the same area. I have no doubt that the main provisions of the Bill will be of considerable benefit by adding home loss payments to market value compensation, and I am sure that market value must remain the basic criterion, but I believe that it is desirable to draw the attention of the House to the situation where, largely because there are substandard properties to be considered, there is a substantial shortfall. My hon. Friend's proposal is for an interest free loan of the difference between


the market value and reasonable replacement value, and I recommend to the House.

Mr. Maxwell-Hyslop: The clause would be a useful and just addition to a Bill which I welcome. I appreciate that my right hon. Friend has fought hard to have the Bill included in this year's legislative programme, and I take as genuine the observations made a few moments ago by my hon. Friend the Under-Secretary of State that it is important to get it on to the statute book with the maximum expedition.
As I understand the whole ethos of compensation, it is that people should make neither a profit nor a loss through the misfortune of society wishing to dispossess someone of his property. Working that out in practice is extremely complex, and I think that in his new clause my hon. Friend the Member for Basingstoke (Mr. David Mitchell) does it with becoming modesty. If my hon. Friend had phrased the clause so that the money was not a loan, or that the cash payment, at least for the life in residence of the affected party, enabled him to secure equivalent accommodation, that would have been justified. The proposal is not that he should receive the cash as a grant for life but that it should be a loan secured on the property. This means that the property becomes less negotiable.
A person's house is more than something in which he lives. It may be something that he needs to use as security for other purposes. I take my hon. Friend's point. It is not just a matter of whim or emotion. If someone's livelihood is in a given town, he has to live in that town if he is to maintain a business whose goodwill is unique to that town.
I recollect a case—not in my constituency, but next door to it—in which, owing to lack of compensation provisions of the kind provided by the clause, a major new dual carriageway stopped short of the cottage and started again on the other side of it. That situation lasted for a couple of years. The argument was that the purchasing authority building the road was not allowed to pay more than the market value of that not very grandiose habitation.
The house was close to the source of employment of its owner-occupier. The

offer of a tiny sum of money which would not have enabled him to buy another habitation, let alone another habitation in proximity to his place of work, meant that the compensation was not doing what it was meant to do. It would not have enabled him to live in the way that he would have lived but for the accident that somebody wanted to put a road through his house.
It seems to me that the new clause far from doing violence to the effects of the Bill brings in a provision which ought to he encompassed in an important Bill such as this. It is unlikely that we shall see another compensation Bill for 5 or 7 years. It is therefore particularly important that we get the Bill right. Whether we do that by accepting the clause or by my right hon. Friend, who is extremely patient in listening to suggestions, undertaking to introduce in another place a clause which encompasses what my hon. Friend is seeking to do, is not of great importance.
I remember a debate in an earlier Parliament when one of my hon. Friends raised this kind of point with equal force and conviction, but he got nowhere. There was no useful response from the Minister. I hope that my right hon. Friend will be able to treat this second bite at the cherry by my hon. Friend the Member for Basingstoke with his usual grasp of the necessity of embodying as much fairness and equity as possible in this very important Bill.

Mr. J. R. Kinsey: Although the clause is very attractive, what would be its effect afterwards on the remainder of the Bill? The practical reason for my question is that I have a constituent who has moved from the line of the motorway as it comes through Perry Barr and has gone across the road, for all the reasons that my hon. Friend the Member for Basingstoke (Mr. David Mitchell) has mentioned: it is convenient, it is the right place for him to live and it is where he wants to be.
In these circumstances, how is my constituent placed? The authorities might in future—the risk is real, because the place is near to an area which has already been put at risk by blight—want to introduce an amendment which will take my constituent's home from him. Because he is doing what he wants to do, will he


lose his right of compensation under the Bill because there is a five-year limitation on living in the area? Will he lose his right of claims to all the other things that are available in the area—for example, soundproofing—simply because he has moved across the road? If ultimately he will lose all those things, this is not quite the kind of provision that we should put into the Bill.

Mr. Graham Page: I shall deal first with new Clause 6, moved by my hon. Friend the Member for Basingstoke (Mr. David Mitchell). As a general matter of principle, we cannot give compensation on a replacement or reinstatement basis. The whole basis of compensation under the Bill is that it shall be at market value, the value which the owner of property who is having it taken away from him compulsorily could have got on the open market, and not the value of some other premises for which lie would have to pay to re-accommodate himself.
I know that there are many hard cases in which the money that an owner gets for the property which is taken away from him will not meet his re-establishing himself in the same area. We have, however, had to retain the market value basis throughout the Bill and not concede in general that there is any case for replacement value or reinstatement value.
My hon. Friend has potently argued a particular case which conies outside that general principle. It is a simple case to understand. In an expanding or a new town, one sells under a compulsory purchase order at market value minus. By law there are certain things that are not taken into account in calculating the market value when the property is taken away from one by compulsory purchase. If one then moves to somewhere else in the same area, either an expanding town or a new town, one can buy only at market value. In this case we are not dealing with compensating for something above market value but taking into account that the man has been deprived of his property at something below market value.
My hon. Friend is very modest in his new clause. He does not ask for the minus to be made a plus. He asks for a loan to be provided by the acquiring authority to enable the deprived owner

to re-accommodate himself in another dwelling. He asks that the acquiring authority may be given power to make such a loan.
I appreciate that my hon. Friends amendment which would have been mandatory on the acquiring authority got lost in the wash somewhere, but the proposal which we are now discussing is merely permissive—that is, to permit the local authority to make a loan in such a case as he has described and to make a certain kind of loan, namely a loan free of interest.
If my hon. Friend turns to Clause 35 of the Bill he will find that precisely that permissive power is given to local authorities to lend on a fixed mortgage to a person who wishes to reinstate himself in a dwelling after his home has been taken away from him under a compulsory purchase order. Therefore, the power already exists for the local authority to provide such a loan so that the man can get his home. There is not power to grant a loan free of interest.
We discussed this matter fairly fully in Committee and I had to resist an amendment on that basis. I shall not rehearse the argument again. The position is, however, that apart from the interest point Clause 35 meets the requirements of new Clause 6 almost entirely. It is not mandatory, nor would the new clause make it mandatory, on the local authority to provide the loan but it gives the authority power to do so and to provide it on fixed mortgage, which it could not do under existing law, and by that means to enable the deprived owner to reinstate himself.

Mr. David Mitchell: Would not my right hon. Friend accept that to allow a mortgage grant to suffer interest at anything like existing ordinary commercial rates means that somebody in the situation which I described would find himself £200 to £300 a year worse off by reason of the added interest he would have to pay? Will my right hon. Friend look again at this to see whether he can do anything further to help?

11.30 p.m.

Mr. Graham Page: Of course, I will look again to see whether there is any reason for taking this case into the realm of a sort of indirect subsidy to the owner-occupier which no other owner-occupier


receives under the Bill. My hon. Friend argues that this is such an exceptional case that we ought to make that form of subsidy of free-of-interest loan. At the moment I cannot agree with him on that, but I will certainly look at it again, now that he has explained it so fully to the House.
On new Clause 12 my hon. Friend gave a most interesting case in a very interesting manner. Where a local authority decides that property is unfit for human habitation and that the best thing to do is to clear the area and demolish the property, there are two ways in which the local authority can deal with that—either by a clearance order under Section 43(1)(a) of the Housing Act 1957 and then the owner has to demolish the buildings; or the local authority can acquire the land with the bricks and mortar on it, demolish the buildings under Section 43(1)(b) and take over the ownership of the land.
Normally there is not a good deal of difference between the compensation, whichever way the local authority chooses to act. There are very few cases in which a local authority takes the course of requiring a clearance of the land by the owner, leaving him with the cleared site, and later coming in with a compulsory purchase order. I think most local authorities think that that—to use my hon. Friend's words—is not a moral way of doing it. But normally the compensation is not very different.
There is the problem which my hon. Friend has put to the House—the case where the marrying of the sites increases the value of each, because it then makes it possible to carry out a substantial development of the whole. This has been a problem for many years—the question of the value; whether, in paying compensation, one can take into account the fact that the sites will be married into a developable site. In certain cases that can be done; in others there is some difficulty in the valuation.
My hon. Friend has now put before the House a specific case which I should like to study to see whether we can avoid this sort of hardship in future and whether we can in some way ensure that the acquiring authority takes the course which I am sure hon. Members would think is the right course for an acquiring authority to take in those circumstances—not to try

to deprive the owner of an amount of compensation which to the acquiring authority may be quite insignificant in the scheme which it is undertaking, not to try to cheesepare the scheme in that way.
I will study the facts which my hon. Friend has given. I cannot at the moment see an adequate amendment in the law to avoid that hardship, but I will certainly see whether something can be done about it.

Mr. David Mitchell: I am most grateful to my right hon. Friend for the kindly way in which he has received the proposed clauses and for his undertaking to look further into the matter. I will, if I may, send him the papers referred to in connection with new Clause No. 12. I hope that he will be able to look again at the problem raised in new Clause 6.

I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

New Clause 8

COMPENSATION IN RESPECT OF BLIGHT

The basis of compensation under a compulsory purchase order or subsequent to the giving of a notice of blight shall be the market value one month previous to the date on which the first planning proposals relating to the area concerned were published, adjusted to constant prices at the time of payment.—[Mr. Sutcliffe]

Brought up, and read the First time.

Mr. John Sutcliffe: I beg to move, That the clause be read a Second time.
I cannot claim alas, that the clause has been drafted by a solicitor, but it is best illustrated by the example of Middles-brough. Much of the town centre has already been torn down and redeveloped, but much remains to be torn down. There is a large area of residential housing that is being swept away by the Tees-side Poly-technical Extension Development, which affects about 600 households. Some houses have already been purchased by the council, and some remain to be purchased beween now and 1981.
Over the past three years, I have had considerable correspondence from constituents and others complaining that the value of their property or businesses has


suffered from planning decisions, planning blight. This led me to ask my right hon. Friend last summer whether he would give the owners of property and businesses the right to apply at the outset of planning blight for a certificate of minimum value equivalent to the market price and, in respect of business, an assessment of goodwill.
I seek by the clause to achieve the same result. Whatever the virtues of the Bill, and it has many, it does nothing to ensure a proper basis of valuation. Surely it has been shown by bitter experience that market value is a meaningless concept once a private house has been effectively removed from the market by a compulsory purchase proposal.
The Secretary of the Tees-side Polytechnic Action Committee which is seeking to protect more than 1.800 people whom it represents in Middlesbrough and who are affected by the extension to the polytechnic, wrote to me about the Bill:
The pecuniary fringe benefits are of minor importance if the valuation is unrealistic. … the fact that redevelopment plans exist or even rumours that such plans may be formulated, immediately reduces property values and makes selling difficult. Should not valuation officers be instructed that when valuing for compensation under these circumstances they should totally ignore this reduction in value caused by impending redevelopment? The award for each property ought not to be less than the amount the property would have realised if develoment had never been thought of, and the area remained unaffected by planning blight."—
Even that is less than reinstatement value.
This point is at the heart of all the bitterness caused by compulsory purchase. Is it too late to have some such clause included in the Land Compensation Bill?
I hope that my right hon. Friend will say that it is not too late.
It is serious enough for people to have their homes taken away by the community, however necessary that may be for the common good, and in that way people obviously suffer. But it is terribly wrong that people should be made to suffer twice by getting knockdown prices for their property, especially at a time when property values overall are steadily rising. The difference can be significant, especially to a person—and this goes for most people—whose home is his or her principal or only investment.
I shall not weary the House with endless examples of constituents of mine who have suffered in this way but I instance a constituent who is a 50-year-old nurse and who was offered £4,800 less than an independent valuation of her property considered to be the proper price prior to planning blight.
In other case the local authority expected to purchase property advertised in 1970 for £1,250 at a price, after blight,, of only £800. I suggest that valuation should be based on current value one month before the onset of planning blight. This would ensure full market value.
If my right hon. Friend can suggest any other better way of securing the objective of elementary justice—I know that he has a fertile mind in these matters—I shall be content. However, I ask him not to ignore the grievous sense of injustice which is felt about this matter.

Mr. Gordon Oakes: I think that the House will have some sympathy with the hon. Member for Middlesbrough, West (Mr. Sutcliffe) in what he is trying to do regarding blight. Does he realise that as the new clause is drafted it could work the other way at this time of inflation?
The Government, I think rightly, are trying to compensate at market value rates with a general view to reinstatement. Therefore, in most instances the market value at the date when a compulsory purchase order is made should reasonably adequately compensate a person, with the additional payments in the Bill, for the acquisition of new property.
I wonder whether the hon. Gentleman realises what could happen if the new clause is taken literally. Suppose a first planning application were made three or four years ago for a new road, or whatever it may be. Under this mandatory clause the district valuer must take into account the value of the house at that time, which would be 1969 or 1970. In such circumstances there could be a severe loss on the property, which I am sure the hon. Gentleman would not want.

Mr. Sutcliffe: The hon. Gentleman has omitted to mention the last part of the clause, which deals with this very point. It says that the valuation should be
adjusted to constant prices at the time of payment.


That would take care of the inflationary process.

Mr. Oakes: If we do that we are coming back to market value; we are adjusting the new clause back to the market value at the time.
I hope that the Minister will look at this point because it is valid. I am not trying to deprecate the hon. Gentleman's argument; I am trying to point out that it could work in reverse, and I am sure he would not want that to happen. I wonder whether a clause could be introduced in another place to give substance to what the hon. Gentleman is trying to do, but, for example, saying that there could be an option between the price at the time of the first planning application or current market value, whichever is the greater. I think that would meet the point that the hon. Gentleman is trying to make without creating a mandatory and possibly difficult situation whereby a person lost because of the rising value of property over what can be a considerable period between the first planning application and the actual compulsory acquisition.
I should like to hear from the Minister on this important question of blight and whether compensation can be given so that a person does not lose twice over: lose by the property being blighted and lose in compensation because it has been blighted and having to live in those blighted conditions for the years between the first planning application and the compulsory acquisition.

11.45 p.m.

Mr. Graham Page: My hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe) is complaining more about the valuers and the valuations than about the law. It is perfectly clear by law that what he is asking should be taken into account is taken into account. What he is asking should be left out of account is legally left out of account. Section 9 of the Land Compensation Act, 1961, provides:
No account shall be taken of any depreciation of the value of the relevant interest which is attributable to the fact that (whether by way of designation, allocation or other particulars contained in the current development plan, or by any other means) an indication has been given that the relevant land is, or is likely, to be acquired by an authority possessing compulsory purchase powers.

So, in valuing the property, one disregards the scheme in development, for acquiring the property, and the value is treated as if that scheme had never been mentioned.
We have extended substantially in this Bill the occasions of blight—that is to say, the occasions when the owner of property can serve on the acquiring authority a notice requiring that authority to purchase his property from him, since, because of certain action by that authority, the value of his property has been reduced, and he cannot sell it at the reasonable price that he could have expected in the absence of the scheme concerned.
But we have not extended the occasions of blight as much as the new clause would require. As I read it, under the new clause, blight would occur when the first planning proposals relating to the area concerned were published. This is considerably extending the occasions on which a purchase notice could be served. It is taking the value of the property back behind the occasions on which the law now recognises—and will by the Bill in future recognise—that there is blight.
If my hon. Friend is seeking to provide a safeguard for persons whose interest in land is being compulsory acquired from the effect on property values of whatever scheme is underlying the acquisition, that safeguard is already provided, by Section 6, as well as by Section 9, of the 1961 Act. To that extent, the new clause is unnecessary.
Moreover, the proposal that compensation should be based on market value one month previous to the date of the publication of planning proposals in the area and then adjusted to constant prices at the time of payment seems to me to be fraught with difficulties. It would be very difficult, if not impossible, to find any yardstick which would not produce as many anomalies as my hon. Friend is seeking to overcome.
On the other point in the new clause, that is, to provide for compensation to be assessed by reference to values relevant at the time that payment is made, my hon. Friend has perhaps overlooked the moderately recent case of Birmingham Corporation v. West Midlands Baptist Trust Association (Incorporated) 1969. Previous to that case, one used to think


that the right point at which to assess compensation was when the notice to treat was served. But that case has now laid it down that compensation should be assessed at the time at which the acquiring authority takes possession, or at the time when the compensation is agreed. This must surely be at a much later date than one month before the scheme is published. Therefore, one would have to find some formula for adjusting the price, taking into account, I suppose, in an imaginative way the inflation between the time of one month before the scheme was announced and the time the payment is made. One is drawing much nearer reality if one assesses at the time the decision is taken or the compensation agreed. The result of the clause would be to encourage delaying tactics by claimants in order to get some sort of adjustment to the price.
Another thing which my hon. Friend has overlooked, which is provided in the Bill, is the entitlement to a 90 per cent. advance payment of compensation within three months of a claim being made on or after the entry by the acquiring authority. I think that this would meet many of the hardships which my hon. Friend has explained have occurred in his area to those threatened.

Mr. Sutcliffe: It may be that the law is clearer on this than what happens in practice. I cannot believe that there is so much smoke without fire. What is happening in my part of the world, Middlesborough, is that from the moment when a planning proposal is published an area is blighted. A compulsory purchase order may not be made for another two years or more. Values suffer from the moment of publication in the Press. It is not, therefore, the value at that moment of a business which thereafter begins to be blighted. It is the value assessed when the district valuation takes place.
Let us consider the instance of a shop. There is undoubtedly a feeling that the district valuation does not take account of the fact that a shop may remain in business while the houses surrounding it are being vacated. The business of the shop is being lost in the meantime. When the shop comes to be assessed for good will the proper value is not arrived at.

Mr. Page: I cannot believe that the valuers in Middlesborough, West, so misinterpret the law. If I understand my hon. Friend correctly, he is saying that first the proposal is published, and thereby the value of the property concerned in that proposal is reduced. It may be a year or more before one reaches the stage at which a purchase notice can be served, before it is legally blighted. My hon. Friend says that during that period the value of the property has dropped.
That is quite irrelevant when considering the compensation to be paid, because one disregards that proposal right from the beginning. It is not a matter of taking the value of the property at the time it is blighted and saying that this is a lot less than it was just before the scheme was published. One disregards the scheme altogether. The existing law meets my hon. Friend's point.
No one thinks that he has been awarded sufficient compensation. There is always the issue of whether it is sufficient. We are all familiar with constituency cases in which people consider that they have not been paid sufficient compensation for their property. But the law clearly provides exactly what my hon. Friend wishes it to provide. If things are as he says, I am afraid that there must be some failure in the application of that law.

Mr. Nicholas Winterton: Will the Minister comment on a constituency point that has come to my attention? An owner-occupier is living in a house built only about 10 years ago. He is finding it difficult to sell it because of a proposed road that will probably not be built for another five or six years. He contracted to buy another house in the belief that he would be able to dispose of his own. He is not able to do so. The local authority refuses to take any responsibility for it, although it is a local authority road. How does the Bill help a person in such a situation?

Mr. Page: The Bill does not and the previous legislation does. I have to advise the hon. Member's constituent to serve a purchase notice on his local authority and fight it out.

Question put and negatived.

New Clause 10

NOTICE OF BLIGHT IN RESPECT OF ECCLESIASTICAL BUILDINGS

"If property otherwise qualifies for compensation under Part V of this Act, a notice of blight may be served in respect of ecclesiastical buildings by the church authorities concerned"

Brought up, and read the First time.

Mr. Sutcliffe: I beg to move, That the clause be read a Second time.
It is a simple attempt to restore equity. I have for some time been frustrated in correspondence with the Department because under Section 192 and Section 201 of the 1971 Act resident owner-occupiers and some mortgagees are eligible to serve a notice of blight and the Bill extends the powers to personal representatives of those categories. The churches are still unprotected, although they are equally open to the ravages of development and blight.
My specific concern has been the Thornaby Methodist Church which is on the edge of the A66 development in Teesside. All the property that surrounded the church has been empty for months. The road swept through the middle of the congregation and dispersed it and the church has been left isolated and subject to vandalism. The church authorities can get no one to act. They cannot serve a notice of blight and they therefore cannot secure a compulsory purchase or a speedy purchase. They have just had to hang on to try to operate from a derelict and totally unsuitable site. Worse than this, they cannot get their money out and this means that without resources they cannot prepare for a new church on a new site. It will take at least two years to build a new church. All this has been going on for the past two years.
I ask the Government to accept the clause as a way of dealing with this situation, which I cannot believe applies only to the church at Thornaby. If my right hon. Friend can think of some other way of dealing with this situation and of putting right this wrong in a simpler way, I shall be content by whatever means he does so.

Mr. Graham Page: My hon. Friend the Member for Middlesbrough, West (Mr. Sutcliffe) has drawn attention to a situation where a blight notice cannot be

served in relation to ecclesiastical buildings which, being exempt from rating, do not qualify for protection under the existing blight provisions. The blight purchase scheme is directed to alleviating hardship among individual owner-occupiers, that is to say householders and the owners of small businesses when they suffer from the effects of blight. I do not know whether we could equate a church with a small business or with the owner of a dwelling house, those two being particularly liable to suffer from the results of blight.
12 midnight
I appreciate that there are many cases in which the congregation of a church is moved because of the clearance of an area and the church is left without purpose, without good use. It is a difficult position. The church has the benefit of the reinstatement clause in the Land Compensation Act. If it can show that it is building another church in another area it will get the reinstatement value. If it forces the sale by a blight notice, it is in effect saying that it will not reinstate, and therefore it will not receive such compensation. We should consider that point before rushing into this too hastily.
But my hon. Friend has presented a case that should be considered. We should have to get over the valuation difficulties, the difficulty of equating the non-rated church property with other non-residental property, and the difficulty of seeing that the hardship is as great for the church as for the householder and the small business, and that it should be brought within these terms.
I ask my hon. Friend to let me examine the matter to see first whether the case is substantial, whether there are churches in great hardship in those circumstances, and, secondly, whether we can do anything about it. I shall let him know if there is any possibility of our adding anything to the Bill to relieve the hardship of those churches that remain unused because they have lost their congregations.

Mr. Sutcliffe: I am very grateful to my right hon. Friend for his sympathetic consideration. I shall be very happy if he can find a way to deal with my problem, even if there is no problem in other parts of the country.

I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 1

RIGHT TO COMPENSATION

Mr. James Allason: I beg to move Amendment No. 2, in page 2, line 20, at end insert:
'(5A) The responsible authority shall remain liable for compensation in cases which they authorise another body to undertake works, which if undertaken by the responsible authority would be public works'.
Under the clause, if a responsible authority provides or uses public works it is liable to pay compensation. That is a tremendous step forward, which we all very much welcome. But I have thought of the possibility of the responsible authority letting land to a nonpublic body which then carries out works that might otherwise have been public works. In other words, that body is providing or using works corresponding to public works. The claimant of compensation will then fail to obtain it, because they will not be public works undertaken by a responsible authority.
I am sure that a responsible authority would not seek to avoid its liabilities in that way, but the law might compel it to do so if it were a completely bona fide action in which the public authority did not itself wish to undertake the works but wished an agency to do them for it.
An example in my constituency concerns a helicopter station. The New Town Commission has planning permission for a heliport. It does not want to operate it but to let it to a private firm, which would obviously have to carry out developments, put down hard standings and so forth. If it were a public authority it would qualify under the terms of this clause for liability to give compensation.
However, my right hon. Friend may take the point that according to the wording of the clause, public works includes "any aerodrome", and I take that to mean that a private aerodrome becomes, if we say so, a public aerodrome. In which case, I take it that the heliport would be covered. Can we have a defini-

tion of whether a private aerodrome is a public aerodrome? Alternatively, if my heliport is covered, then there must be other cases where the same principle would apply to some public body in not wanting to carry out the works itself.
The immediate thing I can think of is an aircraft navigational beacon, which a public authority might wish to instal but not operate itself. It might employ a private firm to operate it, in which case presumably the same principle would apply. Someone may then say that a public beacon may not come under the definition in the clause of
… noise, vibration, smell, fumes, smoke and artificial lighting and the discharge on to the land in respect of which the claim is made of any solid or liquid substance.
But the principle might apply and I think we should be safe rather than sorry in this matter.
My right hon. Friend may object that it is unfair for the responsible authority to remain liable to compensation under my amendment. I do not think it reasonable to put it on the private body, however. I think that it is much simpler for the responsible authority, in making its initial agreement with the private body, to allow for the fact that compensation will become payable. Thus, if, for example, it is granted a lease for a heliport, it will say, "This may leave us liable for £20,000 in compensation and in the circumstances we must charge an entirely different level of rent than we would otherwise."

Mr. Julius Silverman: Supposing there is no lease and no contract. Supposing the public authority simply gives planning permission. Would it not, under the terms of the amendment, be authorising another body to undertake works? Would that not mean that a local authority whose planning committee has given planning permission to construct works would become liable in law to any nuisance caused by those works?

Mr. Allason: I wish I had had the hon. Gentleman's assistance in drafting the amendment. He has made a good point. Perhaps we should say "authorises directly" and not merely by way of planning permission. We all know that our drafting as back benchers is never perfect. But even if it were we would still be in trouble. In the last Parliament,


I put down an amendment referring to "arms and legs". It was turned down by the Government, who replaced it by "legs and arms", which was the way their draftsmen preferred to have it. I do not pretend that this amendment will be perfect and I do not expect my right hon. Friend to accept every word of it, but I do hope that he will accept its spirit.

Mr. Graham Page: We must first be clear that this part of the Bill provides compensation only when public works are operated under statutory powers. I read the amendment of my hon. Friend the Member for Hemel Hempstead (Mr. Allason) where he uses the phrase:
undertaken by the responsible authority
to mean that the works are being operated. It is not a question of construction of works but the actual operation of them. That is what this part of the Bill deals with. He puts the case that a public body authorised by statute to operate certain public works may choose to employ someone else to do that. Under the Bill persons managing the operation of the works are the persons who have to pay the compensation.
There is no reason, if those persons managing the operation of the works enjoy statutory immunity, why they should not meet the compensation. For example, British Rail ought not to be liable to pay compensation as a result of actions of the National Coal Board on railway land. There may be cases where a public body authorised by statute to carry on certain public works chooses to allow, or to employ, someone else, perhaps a man of straw, to carry on the work. That person carrying on the operations would not have statutory immunity and would be subject to the ordinary law of nuisance.
There is the possibility of some public body deliberately employing some worthless person so that they might both escape liability. I think it is a rather far-fetched concept that any public body would be so heedless of its duties. My hon. Friend has put the particular point of a New Towns Commission wanting to operate a helicopter station, or having the statutory authority to do so. He asked whether a private aerodrome is a public aerodrome. The answer is "Yes." It may sound rather an extraordinary proposition but that is so. If the New Towns

Commission chose to employ some private firm to carry on the helicopter station, assuming that it is an operation which is authorised by statute it would be necessary to look at the arrangement as between the Commission and the private helicopter operator. It would be difficult for a public body, by whatever private contract or authority it gives, to get out of its liability merely by putting worthless managers in to operate the works.
I do not reject this out of hand. My hon. Friend has a point and if there is something in it we will certainly see whether any amendment can be moved at a later stage. I am getting reluctant to say that now because I have said it so many times. This Bill is becoming what one might call a "What about it?" Bill. Time and again, in Committee and now on Report, someone has thought of some new point and said "What about this?" or "What about that?" Generally speaking, they have been good points and we have tried to meet them. I should like to say, without giving any undertaking, that I am interested in my hon. Friend's point and I should like to look at it.

12.15 a.m.

Sir Anthony Meyer: I am sorry to intervene after the Minister has spoken, but I wish briefly to support my hon. Friend the Member for Hemel Hempstead (Mr. Allason). It is necessary to extend the application of the Bill to ensure that it does not fail to do what it sets out to do. It would be a pity if this generous measure, which is long overdue, were to be frustrated in its purposes.
I had hoped to table an amendment to extend this principle still further, going beyond even public aerodromes or private aerodromes. What distinguishes these matters is not that they are public or private, but that they are determined by public planning decisions. Therefore, why not include such things as mineral workings and quarry workings whose operations can be extremely dangerous? Indeed some people in my constituency have come near to being killed by quarry explosions. Since these unpleasant events take place because of a public decision, I had hoped that the time would come when the whole situation would be taken care of in a compensation measure. I hope that my right hon. Friend, having


put his hand to the plough, will not turn back and that in due course will put forward another Bill to provide compensation to cover all those who are affected, not merely by public works, but by the consequences of public decisions.

Mr. Allason: I am grateful to my right hon. Friend for confirming that a private aerodrome will count as a public aerodrome. Clause 1(1) of the Bill does not define who is the "responsible authority". May we take it that the operator of a private aerodrome is the responsible authority and that in terms of an aerodrome we are placing an obligation on private bodies to pay compensation? Since my right hon. Friend has undertaken to look at the general principle, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 2

INTERESTS QUALIFYING FOR COMPENSATION

Mr. Julius Silverman: I beg to move Amendment No. 4, in page 3, line 21, at end insert:
',or in respect of which a right of enfranchisement exists or may accrue'.

Mr. Deputy Speaker (Miss Harvie Anderson): I understand that it will also be convenient to discuss at the same time Amendment No. 5, in line 45, at end insert:
',or in respect of which a right of enfranchisement exists or may accrue'.

Mr. Silverman: This is another of those "What about it?" amendments. When this point was raised in Committee, it was regarded sympathetically by the Minister. It relates to property in regard to which a right of enfranchisement exists or may apply. Amendment No. 4 applies to England; Amendment No. 5 applies the same principle to Scotland.
Let me put forward an extreme case. Suppose a man has been living in a leasehold house for four years, and along comes the "responsible authority"—the council—and makes a compulsory purchase order. Let us assume that the man has not yet acquired the right to enfranchise under the Leasehold Reform Act. Without the enfranchisement, all

he has got is an interest for about a year—which is a very small interest. On the other hand, if he had remained in the property for the whole of the five years, he would have been able to enfranchise and would have had a substantial interest. This may make a difference of many hundreds, indeed thousands, of pounds to the person concerned because he would have a saleable interest. Obviously as it stands the wording in the Bill would cause great hardship for a person in that position if the right of enfranchisement is not taken into consideration in assessing value.
I am not sure whether the Amendments as drafted meet the case—they rarely do—but this is the principle I wish to be imported into the Bill. I do not need to develop the case because the Minister considered it in Committee and realised that there was a genuine point which he regarded sympathetically. I should like to know whether at this stage he is prepared to accept the principle, if not in the terms of these amendmens, in the terms of further amendments which could be moved in another place.

Mr. Graham Page: In Committee I expressed gratitude to the hon. Member for Birmingham, Aston (Mr. Julius Silverman) for bringing this point to our notice. I promised to look at it to see whether we could introduce an amendment to deal with it. I give an assurance that, having looked at it, we will introduce an amendment in another place. I apologise for not having such an amendment ready at this stage and for having to say, as expected, that the hon. Member's drafting is not correct. We each appreciate what the other means. We shall have the correct drafting ready, and I hope that when the Bill comes back to us from another place the hon. Member will be satisfied.

Mr. Silverman: With that very generous assurance, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 3

CLAIMS

Mr. Graham Page: I beg to move Amendment No. 6: In page 5, line 1,


leave out from 'compensation' to 'for' in line 3 and insert:
'any reasonable valuation or legal expenses incurred by the claimant'.
In this case claimants are always encouraged to seek professional legal and valuation advice in the submission of claims for compensation and reasonable expenses which are as a result incurred are paid by the acquiring authority. That applies to the ordinary compensation case and it was pointed out in Committee that it did not necessarily extend to claims under Part I for compensation for injurious affection. This amendment applies that to Part I and will enable a claimant to recover both his valuation and legal expenses incurred in making a claim under Part I.

Mr. Mulley: I thank the Minister for fulfilling an undertaking he gave in Committee that he would redraft an amendment which we suggested. I am bound to say that in this case I do not see a substantial difference, but we are very grateful to him. Those involved in valuation cases will be glad to know that they can recover these expenses.

Amendment agreed to.

Clause 6

REDUCTION OF COMPENSATION WHERE OTHER LAND IS BENEFITED

Amendments made:

No. 7, in page 8, line 16, at end insert:
'(5) In subsection (2) above "corresponding enactment" has the same meaning as in section 8 of the said Act of 1961'.

No. 8, in line 18, leave out
'in subsection (2) to sections 6 and 7' and insert 'sections 6, 7 and 8'.

No. 9, line 20, leave out 'and 14' and insert '14 and 15'.—[Mr. Graham Page.]

Clause 8

OTHER RESTRICTIONS ON COMPENSATION

Mr. Graham Page: I beg to move Amendment No. 11, in page 9, line 29, at end insert:
'(5) In a case in which compensation for injurious affection fell or falls to be assessed otherwise than in accordance with section 38 below, subsection (2) above shall not preclude the payment of compensation under this Part

of this Act in respect of depreciation by public works so far as situated elsewhere than on the land acquired'.
I think that it will be for the convenience of the House if with this we take Amendment No. 75, in page 41, line 14, after '(b),' insert 'on that ', which is consequential.

Mr. Deputy Speaker: So be it.

Mr. Page: The amendment is not quite drafting. It is paste and scissors. In Committee my hon. Friend the Member for Stockport, North (Mr. Idris Owen) said that he could not understand the provision being where it was in the Bill. After debate we came to the decision that the best thing to do was to put it in another part of the Bill, and that is why I call this a paste and scissors amendment. I have cut the provision out of one part of the Bill and put it in another. It is the same as before, but it is much more intelligible where it is now situated in the Bill.

Amendment agreed to.

Mr. Graham Page: I beg to move Amendment No. 12, in page 9, line 30, insert:
'Where after a claim has been made in respect of any interest in land the whole or part of the land in which that interest subsists is compulsorily acquired—'.
Subsection (5) is a provision for excluding the payment of double compensation, but as drafted it operates too widely. In fact, we cut out some of the entitlement which claimants might have.
The clause is intended to deal only with a situation where, first, there is a claim or a potential claim under Part I for injurious affection caused by public works or alterations to public works; secondly, the land in respect of which the claim will arise, or part of it, is purchased compulsorily for the purposes of the same public works or the same alterations to public works as give rise to claims under Part I; and, thirdly, the acquisition of the land is at a value undepreciated by the carrying out of the public works or the alteration.
The amendments are designed to restrict the application of the subsection to those situations and not to let it stray into further ones. The amendments provide that a person entitled to Part I


compensation will always get it, but the compensation for compulsory acquisition for the purpose of the same works as those to which the Part I claim relates will be reduced.

Amendment agreed to.

Amendment made: No. 13, in page 9, leave out lines 40 to 45 and insert:
'and the compensation in respect of the compulsory acquisition falls to be assessed without regard to any diminution in the value of the interest which is attributable to the public works, the compensation in respect of the acquisition shall be reduced by an amount equal to (or, if the acquisition extends only to part of the land, to a proportionate part of) the compensation paid or payable on the claim.'—[Mr. Graham Page]

Clause 9

ALTERATIONS TO PUBLIC WORKS AND CHANGES OF USE

Mr. Eldon Griffiths: I beg to move Amendment No. 15, in page 10, line 44, at end insert 'or apron'.

Mr. Deputy Speaker: With this we are to take the following amendments:

No. 14, in page 10, line 44 leave out from 'aircraft' to end of line 45.

No. 18, in page 11, line 25, leave out subsection (6) and insert:
'(6) in this section "runway or apron alterations" means—

(a) the construction of a new runway, the major re-alignment of an existing runway or the extension or strengthening of an existing runway; or
(b) a substantial addition to, or alteration of, a taxiway or apron, being an addition or alteration whose purpose or main purpose is the provision of facilities for a greater number of aircraft'.

No. 26, in page 14, line 21, at end insert 'or apron'.

No. 27, in page 14, line 27 after 'runway', insert 'or apron'.

Mr. Eldon Griffiths: In Committee there was a good deal of discussion about the eligibility for compensation in the case of airports where new terminal buildings were erected, where supersonic or jet planes rather than ordinary turbo-prop or other aircraft began to use the aerodrome or where taxiways and hardstandings were extended.
The Committee accepted, as a matter of principle in this case as it did with highways, that the mere intensification of use should not of itself entitle people to compensation since the use of existing facilities up to their natural capacity should always be expected by those who purchase. Nevertheless, as the hon. Member for Widnes (Mr. Oakes) said, very reasonably, a great deal of inconvenience can be caused by aircraft revving their engines on hard standings or as they taxi before take-off. My hon. Friend the Member for Hemel Hempstead (Mr. Allason), who speaks with great knowledge of these matters, pointed out that changes to taxi-ways and hard standings can also enable the runway capacity to be changed and enlarged.
It is because my right hon. Friend accepted the force of my hon. Friend's argument that we are moving the Government amendments here which will enable taxi-ways to be included. We have managed to achieve this by use of the old English word "apron", and we have defined it in these words.

12.30 a.m.

Mr. Allason: I am extremely grateful to my hon. Friend the Under-Secretary for this amendment. It will make a great deal of difference.
The situation at Luton and at some other airports is that there is only one taxi-wav on to the airfield, and this limits the number of aircraft which can take off per hour. By providing a taxi-way at the other end of the runway, the capacity of the airfield would be doubled. So it is not only a matter of the provision of facilities for a greater number of aircraft, as mentioned in Amendment No. 18, but provision for a greater number taking off, which is what concerns everyone.
I hope that the Government will not accept Amendment No. 14, which is quite abominable.

Mr. Roger Moate: My hon. Friend the Under-Secretary will recognise that the clause as amended will have a considerable effect for sonic years to come when we come to consider the impact of the new airport, runways and facilities at Maplin on my constituency, including the Isle of Sheppey and North Kent. Naturally, I hope that it will never be built, thus saving the Government and the taxpayer a great deal


of money and a great deal of compensation. But in years to come I think that we shall see this clause as a very important one for people living in North Kent. I am grateful to the Government for seeing their way clear to extending the benefits of the clause.
My right hon. Friend said that this was becoming a "What about it" Bill and he referred to the number of occasions on which he had said that he would study amendments and see whether they could be incorporated. Most hon. Members would say that his willingness to examine matters was sympathetic. His response to amendments is widely appreciated. We are immensely grateful for the Bill, the generous way in which it has been introduced and the sympathetic way in which my right hon. and hon. Friends have responded to our suggestions. That applies especially to this amendment.
There are, however, one or two matters concerning the impact of the clause about which I wish to ask my hon. Friend. Presumably it has its effect in two ways. One is under Clause 1 on the question of compensation arising from depreciation through aircraft noise. The other is under a later clause on the question of sound-proofing. This could affect my constituents who live 10 miles away from the runways. Some people might say that that is too far away to be affected by the airport. I should like to think that that is the case. Unfortunately, it is not.
My hon. Friend the Member for Hemel Hempstead (Mr. Allason) has considerable experience of these problems. In Committee he said:
At 12 miles away from the runway the noise from some types of aircraft is greater and getting worse than that permitted at Heathrow when night take-offs were allowed. The situation is appalling."—[OFFICIAL REPORT, Standing Committee A, 12th December 1972; c. 95.]
That is a prospect which my constituents have to consider possibly occurring some years hence. Understandably, we must concern ourselves with the compensation provisions which the Government are making.

Mr. Allason: In fairness, I ought to point out that there are special considerations as regards that 12 miles. Luton Airport is the worst sited in Britain. All aircraft have to fly at low altitudes for

between 15 and 20 miles in order to keep underneath the flight paths from Heathrow. That is why aircraft are at only 2,000 or 3,000 feet when they are 12 miles away. I trust that that will not happen in Kent.

Mr. Moate: I trust so too. I shall be careful not to go far in that direction because I might be out of order. Here in central London, however, 14 or 15 miles from Heathrow, aircraft come over at a height, I think, of 3,000 feet. That is their accepted, legal height. I do not understand why. I fear that when they come over Kent they will be at a height of not much more than 4,000 feet and we will suffer serious noise nuisance.
My particular questions are these. Am I right in saying that to obtain compensation under Part I of the Bill a person simply has to prove depreciation as a result of aircraft noise, or is it the Government's intention later to specify criteria to which people will have to work to decide whether they are entitled to compensation?
Secondly, under the sound-proofing provisions it is clearly stated that orders will subsequently be issued. I should like to know from my hon. Friend the Minister when we might expect those orders and whether they will cover the people who come within the 35 noise contour line referred to in recent documents by the Government.

Mr. Mulley: May I express the hope that we shall soon get to Clause 18, on which this matter arises? If the hon. Member is trying to discuss the whole Bill under "or apron" he is stretching things a hit far. We shall come to questions of height when we reach the clause concerning soundproofing.

Mr. Moate: I have come to my conclusion. The term "or apron", however, is not the amendment.

Mr. Mulley: Yes, it is.

Mr. Moate: It is a much broader group of amendments than that. I have made the points I wish to make on the amendment and I hope that my hon. Friend will be able to answer some of the points I have raised.

Mr. Eldon Griffiths: As the right hon. Member for Sheffield, Park (Mr. Mulley) fairly said, "apron" cannot be made to


cover everything. The short answer to my hon. Friend is that it is not sufficient simply to prove that aircraft are causing a nuisance.

Mr. Moate: Not depreciation?

Mr. Griffiths: Or depreciation as a result. What one has to show is that there is a change of use of the particular public work which has brought this about. That is why we have said in the amendment, as urged by my hon. Friend the Member for Hemel Hempstead (Mr. Allason), that we would have regard to putting in new aprons or taxiways where the revving of the engines can take place.
On the sound-proofing point, I am sure that we should follow the wise advice of the right hon. Member and wait until we come to Clause 18.

Amendment agreed to.

Mr. Michael Cocks: I beg to move Amendment No. 16, page 10, line 45, at end insert:
'or a change to supersonic aircraft'.
At this hour of the night I shall be brief and deprive myself of the unfortunate task I have laid on myself, reminding the Minister of the depredations he wrought on the city which I represent and simply saying that in this case he will appreciate that the Concorde, SST or supersonic aircraft is built in Bristol.
I move the amendment not with any feeling that this aircraft will be any great nuisance to people who are adjacent to airports where it lands but rather as an expression of complete confidence that, whatever may happen in future, we are absolutely assured that such will be the technical perfection and quietness of the aircraft that we are fully prepared to compensate anybody who may consider that he has legitimate claims against it.
With those few words I invite the Minister to state the case against the amendment, because I am sure that under it if it were passed, no compensation would ever be claimed by any reasonable person.

Mr. Eldon Griffiths: The hon. Member for Bristol, South (Mr. Michael Cocks) has moved the amendment with considerable ingenuity and confidence, which I fully share. But I am afraid that I am not able to advise the House to accept the amendment as such because of the

essential principle here. Where one is merely intensifying the use of an existing facility, as was argued and agreed in Committee, that would not create eligibility to compensation as such.
May I put it this way. The introduction of jet aircraft or helicopters or supersonic aircraft does not of itself create a change of use of an aerodrome. The aerodrome is still being used for the purpose for which it was built, namely the landing and take-off of aeroplanes. A change of use would occur only if the airport were to be converted to some other type of use—for example, if it were changed into a car racing track. There is no change in the use of an aerodrome simply because larger or faster or different aircraft use it.
The distinction between supersonic aircraft per se and other aircraft is really quite irrelevant because aircraft do not in any case take off and land at supersonic speed. In fact, Concorde will be no noisier than existing aircraft such as the VC10 or the Boeing 707.
Sound insulation schemes exist around Heathrow and will shortly be in operation around certain other major airports. The boundaries within which dwellings can be insulated are related to the noise contours. If the noise and the aircraft numbers increase, the noise contours will be amended and the sound insulation boundaries might well as a result be extended. In this respect I am very glad to be able to tell the House that the noise contours are, in fact, about to be changed around Heathrow in a way which will be very helpful to people there.
I am therefore bound to resist the amendment, while acknowledging the ingenious way in which the hon. Gentleman moved it, largely because it conflicts with the principle firmly embedded in Part I, namely that intensification of use is excluded from the concept of alteration of public works for the purposes of this Bill.

Mr. Michael Cocks: I find the hon. Gentleman's argument most decisive, particularly his point that the use of airfields by Concorde will be no different from that of other aircraft, from the point of view of noise levels.
I therefore beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: No. 18, in page 11, line 25, leave out subsection (6) and insert:
'(6) in this section "runway or apron alterations" means—

(a) the construction of a new runway, the major re-alignment of an existing runway or the extension or strengthening of an existing runway; or
(b) a substantial addition to, or alteration of, a taxiway or apron, being an addition or alteration whose purpose or main purpose is the provision of facilities for a greater number of aircraft'.—[Mr. Graham Page.]

Clause 10

MORTGAGES, TRUSTS FOR SALE AND SETTLEMENTS

Mr. Graham Page: I beg to move Amendment No. 21, in page 12, line 16, leave out from '(b)' to end of line 17 and insert:
'for subsections (2) and (3) there shall be substituted the following subsection—
(2) Where the interest is that of any of the persons specified in section 67 of the Lands Clauses Consolidation (Scotland) Act 1845, that Act shall have effect with regard to the application of the compensation as it has effect with regard to the application of the compensation payable in respect of the purchase of land"'.
The purpose of this amendment is to make appropriate provision for the application of compensation in Scotland where the person having the qualifying interest has only a partial or limited right of ownership in the land. In particular, this provision applies to special cases such as proper life-renters and heirs of entail in possession, which were not adequately covered by the original adaptation of subsection (2).
By providing that the compensation shall be treated in the same way as compensation payable for acquisition under the Lands Clauses Consolidation (Scotland) Act 1845, this amendment avoids the difficulties arising from differences between the trust laws of England and Scotland, and applies a suitable established procedure to the disposal compensation paid in these cases.
I am sorry that the hon. Member for Renfrew, West (Mr. Buchan) is not here to appreciate my knowledge of Scottish law. I must say that he fought well for Scotland throughout our Committee proceedings, and we were all extremely grateful for the contribution which he made

and the way in which he looked after the interests of Scotland. With this amendment I am trying to please him and reward him for what he did for us in Committee.

Mr. Mulley: I hold a proxy for my hon. Friend the Member for Renfrew, West (Mr. Buchan) and I should like to say, on his behalf, how much he appreciates the action of the right hon. Gentleman. I should explain that because of the distance, the late hour and his commitments in Scotland tomorrow, he had to leave before he could express his appreciation personally.
The right hon. Gentleman managed without the aid of a Scottish Law Officer. If he has a little leisure time, perhaps he will expand his activities North of the Border.

Amendment agreed to.

Clause 11

INTERESTS ACQUIRED BY INHERITANCE

12.45 a.m.

Mr. Graham Page: I beg to move Amendment No. 22, in page 13, line 4, at end insert:
'(6) In the application of this section to Scotland—

(a) in subsection (2), for the words from "testamentary" to "tenants" there shall be substituted the words

"(a) a testamentary disposition or any other deed with testamentary effect taking effect on, or
(b) the law of intestate succession";
(b) in subsection (3), for the words "by appropriation of it in or towards" there shall be substituted the words "in satisfaction or in partial";
(c) subsections (4) and (5) shall be omitted'.

This, too, is a tidying-up amendment for Scotland.
Subsections (2) to (5) of Clause 11 define what is meant by "acquiring by inheritance" for the purposes of the clause. They cover the obvious case of acquisition by testamentary disposition or will and the words,
or any other deed with testamentary effect
in paragraph (a) of the amendment cover analogous cases which in England and Wales are covered by the words,
or the right of survivorship between joint tenants
in subsections (2), (4) and (5).
Paragraph (b) of the amendment merely adopts the appropriate Scottish wording for the purposes in question.

Amendment agreed to.

Clause 12

ECCLESIASTICAL PROPERTY

Mr. Graham Page: I beg to move Amendment No. 23, in page 13, line 12, after 'benefice', insert:
'of the Church of England'.

Mr. Deputy Speaker (Miss Harvie Anderson): With this we are to take Amendments Nos. 24 and 25.

Mr. Page: During the Committee stage, the hon. Member for Renfrew, West (Mr. Buchan) moved an amendment not in a spirit of "narrow Chauvinism", as he said, but seeking confirmation that compensation for Church of Scotland property in England and Wales would not go to the Church Commissioners. I remember that we all thought it a rather good joke at the time that Scottish Church property should be thought to be going to the Church of England.
I undertook to seek the advice of the Lord Advocate as to whether any drafting clarification would be desirable. I am delighted to say that I was advised by the Lord Advocate that we could put the matter out of doubt with these amendments.

Amendment agreed to.

Amendments made: No. 24, in page 13, line 14, after 'diocese', insert:
'of the Church of England'.

No. 25, in line 16, leave out subsection (3).—[Mr. Graham Page.]

Clause 14

INFORMATION FOR ASCERTAINING RELEVANT DATE

Amendments made: No. 26 in page 14, line 21, at end insert 'or apron'.

No. 27, in page 14, line 27, after 'runway', insert 'or '.

Clause 17

INTERPRETATION OF PART I

Mr. Eldon Griffiths: I beg to move Amendment No. 29, in page 15, line 22,

leave out 'relevant' and insert 'responsible'.
It may be convenient with this to take Amendment No. 95.
These amendments remedy a drafting error. Part I talks about a "responsible" authority, but the definition in Clause 17(1) refers to a "relevant" authority. The amendments bring the word "responsible" rather than the word "relevant" into the clause.

Amendment agreed to.

Clause 18

SOUND-PROOFING OF BUILDINGS AFFECTED BY PUBLIC WORKS

Mr. Eldon Griffiths: I beg to move Amendment No. 30, in page 16, line 38, leave out from 'instrument' to end of line 40 and insert:
'(8) A draft of any regulations under this section shall be laid before Parliament and the first regulations shall not be made unless the draft has been approved by a resolution of each House of Parliament'.
When in Committee we were discussing what was then Clause 17 and what is now Clause 18, the right hon. Member for Sheffield, Park (Mr. Mulley) said that he thought that the regulations under the clause should come under the affirmative procedure, at least in the early stages. As the regulations will be novel, my right hon. Friend and I have considered the matter, and I undertook to raise it with the Leader of the House.
My right hon. Friend wrote to the right hon. Gentleman following consultations, and the net effect is the amendment to make the necessary adaptations to provide that the first set of regulations, which are all-important, which establish the precedents and which set out the nature of the contours in this new area of policy, should be subject to the affirmative procedure of both Houses, and the motion to approve the regulations will have to be accepted by both Houses.
As my right hon. Friend made clear in his letter, subsequent regulations will be subject to the negative resolution procedure. The point that is accepted by both sides of the House is that the first regulations will be creating a new precedent, so it is right that there should


be a separate negative resolution procedure.

Mr. Mulley: I am sure that the House is obliged to the Government for making this amendment. We were in the difficulty in Committee, as we are tonight, that we could not discuss this clause with any sense because the whole content of it depends on regulations still to be made. Naturally, we do not know to this day what those regulations will be. Therefore, it seems right—I am glad that the hon. Gentleman has agreed—that the House should have the opportunity to discuss the regulations when they are available. However, this matter is open to the drawback that we cannot amend draft regulations requiring the affirmative resolution procedure. Nevertheless, the House will have the opportunity to discuss them and I am sure that if a strong view were expressed the Government would take it into account.
The need for the affirmative resolution procedure gets daily more necessary because the negative procedure is valueless. It is almost impossible to get a debate on a prayer under the negative procedure. Therefore, unless there is provision for the affirmative procedure it is doubtful whether hon. Members who have direct and present airport and highway noise problems—in particular, the hon. Member for Faversham (Mr. Moate) fears that he may have such problems in future—will have the opportunity to express the fears and views of their constituents in the House.
I am glad, therefore, that the first of these sets of regulations will be under the affirmative resolution procedure. I understand from what the Under-Secretary said that it would not just be a formality of issuing a set of regulations to get over the affirmative resolution procedure and then putting the guts of the regulations into a subsequent set. I understand that the first set of regulations to be tabled will embody the principles and will, in effect, be the regulations which everyone will want to discuss before they come into force.

Mr. Eldon Griffiths: I formally confirm that that is so. The right hon. Gentleman will have received the letter which I wrote on behalf of my right hon. Friend to all Members of the Committee outlining the approach that we were in-

tending to adopt. He will understand that, although we may have to modify some aspects, the first set of regulations will follow broadly the outline which was given to Members of the Committee.

Mr. Mulley: We are indebted to the hon. Gentleman for carrying out that undertaking and for letting us have this information today. I thought it right not to refer to that, because, as he rightly pointed out, it is still in the consultative process and may in the end not follow that form exactly.

Mr. Moate: If I had scrutinised the Order Paper more carefully I should have realised that this was a more convenient time to put the question that I put earlier. We are concerned still about the type of noise contour line which is likely to be selected. It used to be and still is a noise contour line of 55 at Heathrow. However, my hon. Friend has given hope to the people living near Heathrow that this might soon be changed. I think that it is 45 NNI in other areas. This obviously would not help my constituents. However, I should like to know when we may expect these new draft regulations to come before the House in the broadest possible sense.

Mr. Eldon Griffiths: The first set of regulations will be concerned primarily with highway and road traffic noise, which is by far the most pressing problem with which we have to deal, because it affects large numbers of people. But we shall have regard to the problem of aircraft noise as well at a subsequent time. I cannot give my hon. Friend any timetable at present, but we have this very much in mind and will do it as soon as we can.

Amendment agreed to.

Mr. Eldon Griffiths: I beg to move Amendment No. 31, in page 17, line 7, at end insert
'and except that "responsible authority", in relation to a highway, includes any authority having power to make an order in respect of that highway under section 1 or 6 of the Road Traffic Regulation Act 1967 (traffic regulation orders)'.
This picks up a point which arose in Committee when my hon. Friend the Member for Beckenham (Mr. Goodhart) was anxious that those who suffer from noise resulting from traffic management schemes should be entitled to receive


sound insulation. Hon. Members who were on the Committee will recall that we could not agree that compensation should be payable where traffic management schemes came in, because they did not involve any material alteration of the road. Nevertheless, people suffering from noise as a result of such schemes will be entitled to receive sound insulation in many respects.
The Greater London Council in particular has been concerned that powers should be available. The Minister for Housing and Construction has already told officials of the GLC that the Bill will not exclude the possibility of such schemes being covered in future regulations. The GLC has undertaken to make a case as to which type of scheme should be included. It is plainly impossible to include them all. For example, it cannot be the intention of the House to cover traffic regulation restricting right turns or those schemes which do not result in any change of the noise climate.
The essential point is that the term of art in the Bill, "responsible authority", here means the highway authority. However, traffic management schemes are made by traffic authorities, and although the two will usually be the same, especially after the local government reorganisation, in London, for example, the GLC is the traffic authority for Greater London but is only the highway authority for the metropolitan roads and major roads other than trunk roads. But traffic management schemes can cover principal and non-principal roads, and it is desirable that the traffic authority, which is the authority responsible for management schemes, should also be able to provide sound insulation necessitated by its own schemes. I believe that this goes a long way to meet the point so eloquently made in Committee by my hon. Friend.

Mr. Philip Goodhart: I am grateful to my hon. Friend for having gone so far to meet the point.

Amendment agreed to.

Clause 20

ACQUISITION OF LAND IN CONNECTION WITH HIGHWAYS

Mr. Mulley: I beg to move Amendment No. 32, in page 17, line 19, at end insert:
'and if so required by the owner thereof shall'.

This amendment was moved in similar form in Committee, where we had a considerable discussion on it, but I make no apology for raising the matter again tonight, even at such a late hour, because it is a point to which we attach great importance and one which has been the subject of a great deal of attention from those concerned outside.
The new clause, which is now Clause 20, has been generally accepted as an important innovation, since it gives highway authorities the power to acquire land compulsorily under subsection 1, in order to mitigate the adverse effects of the use of a highway, while subsection 2 permits them, by agreement, to acquire land the enjoyment of which is seriously affected by the use of the highway.
What they do not have to do, and what this amendment is directed to requiring them to do, is to acquire the land if, in the opinion of the highway authority, it is not necessary hut, in the opinion of the owner or occupant of the property, it is. It is a very one-way system. A highway authority can say, "We shall buy this land or property because you are complaining that its amenities are destroyed by virtue of the public works", and an agreement can be made. But if the highway authority is difficult or feels that it wants to be extremely economical in its use of public funds, it can refuse to make such agreement and accordingly the person concerned has to continue living on that property. He may get some compensation by way of injurious affection, but in not nearly the same way as if he could require the local authority, as people can under the blight provisions, to take over the property at a proper valuation.
1.0 a.m.
As we know, some people, particularly the elderly, are more worried than others by noise and the consequences of a highway running very close, in some cases just outside windows. As the Bill is drafted, whether that is such as to seriously affect the enjoyment of the land in question is entirely at the discretion of the highway authority. The owner or occupier ought also to have a view. In the event of a dispute as to whether a claim was reasonable, the matter could always be settled by the courts. This would not give the owner or occupier any right, without a check, to say, "You have


to buy my property". As is always the case, disputes will arise, under all parts of the Bill, and there is recourse to the courts and other procedures to satisfy them. But at present the Bill is wholly geared on the side of the local authority and there is no right to the owner to exercise what in other parts of the Bill would be a blight notice to require the property to be taken over.
If I may make a pun, we feel that this is the one blight on an otherwise admirable clause. Even at this late stage in the progress of the Bill, I hope that the Government will look at this again to see whether it is possible to meet the anxieties of the many people who have written to me and the surveyors and others who have made representations to this effect.

Mr. Ted Rowlands: I reinforce what my right hon. Friend the Member for Sheffield, Park (Mr. Mulley) has said. We discussed this matter in some detail in Committee. One of the major targets of criticism of the Bill by many groups and professional organisations, ranging from Justice to the Royal Institution of Chartered Surveyors, has been the failure of the clause to provide a power for the resident owner-occupier to serve a blight notice when he believes his property to be adversely affected.
The clause gives tremendous discretion to the local authority to acquire a property. If it does not wish to do so and wishes to dispute whether there has been an adverse effect as a result of developments, the householder can take no action to challenge the local authority's discretion.
We feel strongly that, alongside the new discretionary power given to local authorities to acquire property that is adversely affected, the Government should also give the right to the individual to challenge the local authority and to say, "I think that my house is seriously affected, whatever you say." The local authority then would have perfectly reasonable power to oppose a blight notice and, if necessary, the matter could be resolved in the courts. But at least the individual householder should have the right to try to challenge the point, especially if the local authority is not willing to comply with the spirit of the clause.
In Committee the Under-Secretary said, at column 234, that he could see

considerable difficulties in accommodating our point where temporary disturbance was created. He said that he would nevertheless look seriously at the question of permanent and serious disturbance. He has not produced anything on Report but I would ask him now to tell us whether he has considered the matter. Will he now put down an amendment giving a right to the individual to serve a notice where serious and permanent disturbance is created by the works of a local or public authority? That would be establishing a right which is sought not only by hon. Members but by a large variety of organisations which are deeply involved in these issues and which believe this to be a major omission.

Mr. Julius Silverman: I also rise to support this very important amendment. We are dealing here with probably the most serious defect in the Bill. It has been recognised as such by many authorities. I wish to speak from my practical experience. As I have said before in the House my constituency includes the interchange known as the Gravelly interchange or sometimes as "spaghetti junction" where many hundreds of house-owners are affected by the development of the M6 through Birmingham. People react differently to this sort of nuisance and noise. Some of them may be content to live in their present homes provided they get the necessary mitigation by insulation and other works, and the necessary compensation. Some find the situation intolerable, and what they desire most of all is to get away and get out. I suggest that some provision should be made for those who do not desire to live in these circumstances.
That is what the amendment is about. I realise, as the Minister said, that this cannot apply to temporary arrangements under which temporary works are done. It would be unreasonable to expect a responsible authority to buy if the work is merely temporary. But where the trouble is permanent the owner should have the right to serve a notice. I hope that even at this stage the Minister will look at the matter again. It is of great importance for many houseowners and as has been said already, practically all the various authorities and the various learned organisations would approve of such an amendment.

Mr. Eldon Griffiths: I think that hon. Members will agree that whenever a powerful case has been put my right hon. Friend and I have tried to consider it with a view to meeting the case wherever it can be met. This matter was discussed in Committee and we have given a great deal of consideration to the points that were made. Our investigation has led us to take the same view that we took during the Committee stage. It is mainly because in the case of properties which are seriously affected by the carrying out of works, it would be wrong to require a local authority highway authority to buy properties which it does not need and which may be subject to a purely transitional disturbance. The hon. Gentleman has suggested that it should be only where serious and permanent damage is done. But the Bill already provides a good measure of protection to be given to the blighted occupiers. It gives them the prospect that the highway authority will be able to provide sound insulation or at its discretion to acquire properties that are severely affected.
The question is whether the local authority will behave in the spirit of the Bill. I have no reason to think that it will not do so. If hon. Members feel that there is evidence of authorities that will not, my right hon. Friend and I would very much like to have it. We expect to introduce at a later stage a provision enabling the highway authority to reimburse temporary hotel expenses while the noise from the carrying out of the works is at its worst, so we are meeting the point about the temporary nuisance.
The real problem is in requiring local authorities to buy with public funds properties that they do not need.

Mr. Julius Silverman: The Minister said that he hopes that local authorities will act within the spirit of the Bill. But they may not be the highway authority. It may be that the hon. Gentleman's Department is the highway authority. Will the Department act within the spirit of the Bill and be prepared to buy houses that have been seriously injuriously affected by public works?

Mr. Griffiths: I will not give an undertaking now that my Department will for all time buy out all properties seriously affected, because it is a matter of judgment as to how serious is serious or how

permanent is permanent. But I do give an undertaking that my Department, which is a major road-builder in its own right, most certainly will operate entirely within the spirit of the Bill.

Mr. Mulley: It is impossible to furnish any of the evidence for which the hon. Gentleman asked, because the powers do not exist. Therefore, we do not know whether local authorities will or will not exercise the discretionary power given them. So far, when they have been told, "You are bringing this very near my house. It will be a great nuisance", they have said, "We should like to help you, but the law does not permit us to buy anything that is not on the line of the road." That is why this innovation has been made.
As to local authorities not wanting to buy property they do not need, if that is to be the criterion, the clause is superfluous, because it says that they can do it by agreement. Clearly, they will not need either of these two provisions. They will be doing it to try to mitigate a nuisance. That is the principle we want to be extended.

Mr. Griffiths: It is the question of forcing them to buy what they do not need. The clause says that they should behave like good neighbours and agree to acquire the property from people who would be seriously affected. But it is a matter of not forcing them to do so, as the amendment would.
Where properties are affected by the use of new and improved highways, the Bill's proposals already give even wider protection than before to those with qualifying interests. For example, if a property is depreciated, compensation is paid and sound-proofing is provided on the responsibility of the highway authority. I believe that in most cases those two measures would bring up the value of the affected properties in the open market to a point where the owner will not necessarily suffer all that much financial loss.
To give the owner-occupiers of affected properties the right to require the highway authority to buy them is a proposition that can easily be made in the persuasive way in which the hon. Gentleman has made it. The disturbance is to be permanent. It is to be serious and,


as he said, the purchase will be by agreement, or, if there is a disagreement it can be settled in court. But the amendment does not say that. As the Bill is drafted, the introduction of the term "shall acquire" is not really compatible with the essence of the clause—that it should be done by agreement. Once one says that, one compels which it not agreement.

1.15 a.m.

Mr. Rowlands: If the amendment does not achieve what we want, we ask the hon. Gentleman to reconsider it and redraft it. We are suggesting that an owner-occupier be given the right to service a purchase notice. It will, of course, be a minority of cases, but we are trying to safeguard the minority. As in so many other blight notice provisions, the authority should be entitled to resist a notice where it can provide the evidence. That is what we are after. If the hon. Gentleman says that the amendment does not fit the point, I will gladly withdraw my objection and ask him to draft something on the lines he suggests so that blight notice can be served and the authority will have the power to resist it where it has the evidence.

Mr. Eldon Griffiths: I see the point, but in practice that is the position at the moment. The authority may acquire by agreement. If it can be persuaded or cajoled into doing so, it can do it by agreement. The amendment brings in the possibility of compelling the authority to do it—that is the difficulty.
However, I have had a word with my right hon. Friend about this. We have to safeguard the minority of interests which might be affected, and we also have to protect public funds. There is a problem of balance. There is the difficulty about importing the right to compel a local authority to do it. There is a basic incompatibility between compelling it to do it and having it done by agreement. But in the light of the arguments we will have another look at this. I can give no undertaking, but we want to help if we can, and we will see whether we can come a little closer to what the Opposition want. I cannot undertake that we will succeed, for I find it difficult to agree that the authority should be compelled. I think there must be an element of agreement.

Mr. Mulley: We are obliged to the hon. Gentleman for agreeing to have another look at the problem. I hope he will bear in mind that under subsection (1) the highway authority has powers compulsorily to acquire. We are only asking that the owner-occupier should have a little bit of reciprocity. I accept the difficulty where the situation is going to be temporary and we understand that the amendment would have to be redrafted to meet that point.
On the understanding and in appreciation of the fact that the Government will consider the problem further, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Eldon Griffiths: I beg to move Amendment No. 33, in page 19, line 4, leave out
'or improvement of the highway'
and insert
'of the highway or, as the case may be, the improvement'.
This is essentially a drafting amendment intended to remove the ambiguity of the words in question.

Amendment agreed to.

Clause 23

ADVANCES FOR ACQUISITION OF LAND AND EXECUTION OF WORKS BY HIGHWAY AUTHORITIES

Mr. Eldon Griffiths: I beg to move Amendment No. 34, in page 21, line 38, leave out 'and 21' and insert 'to 22'.
Clause 23 extends the powers of the Secretary of State to make advances to a highway authority in connection with the acquisition of land and the execution of works. The amendment brings new Clause 22, introduced in Standing Committee, which concerns the agreement to the use of land near highways for tree planting, landscaping, and so on, within the scope of his powers.
In Committee we all thought it important that there should be an ability to acquire land or make agreements that land near highways should be improved in appearance by being planted with trees, landscaped and so on. The amendment simply brings new Clause 22 within


the scope of the powers of the Secretary of State.

Amendment agreed to.

Clause 26

RIGHT TO HOME LOSS PAYMENT WHERE PERSON DISPLACED FROM DWELLING

Mr. Graham Page: I beg to move Amendment No 35 in, page 23, line 38, leave out:
'or passing of a house order or resolution'
and insert:
',passing or acceptance of a housing order, resolution or undertaking'.
I think it would be convenient if we discussed with this amendment the following Government amendments: Nos. 36, 41, 42, 43, 61, 62, 63, 64, 65, 69, 70, 71.
All of these deal with the question of displacement and the definition of displacement when dealing with home loss payments, disturbance payments and the duty to re-house residential occupiers. All the clauses which deal with this apply when a person is displaced from a dwelling in consequpence of, among other things, the making of a housing order. This is defined in Clause 26(7) as a demolition, closing or clearance order under Part II or Part III of the Housing Act 1957, Section 60 of the Housing Act 1969 or Part II of the Housing (Scotland) Act 1966.
As an alternative to making a demolition or closing order a housing authority may, and frequently does, if it thinks fit, accept an undertaking from an owner that an unfit house will not be used for human habitation. If as a result an occupier is displaced we would like that to be a displacement which brings into operation Clauses 26, 33 and 34.
Amendment No. 43 is the key amendment in this group. It amends Clause 26(7), the definition subsection, to include in the definition of a housing order those cases where an authority accepts such an undertaking because it is proceeding by way of demolition or closing order. All the other amendments are consequential upon that amendment.

Amendment agreed to.

Amendment made: No. 36, in page 24, line 8, leave out
'or passed the resolution'

and insert
'passed the resolution or accepted the undertaking'.—[Mr. Graham Page.]

Mr. Graham Page: I beg to move Amendment No. 37, in page 24, line 11, leave out 'seven' and insert 'five'.
Might I suggest that with this Amendment we also discuss the following amendments: No. 38, in page 24, line 11, leave out 'seven' and insert 'three'.
No. 46, No. 49, No. 47, in page 25, line 28, at end insert 'and a minimum of £250'.
No. 51, No. 50, in page 26, line 15, at end insert 'and a minimum of £250'.

Mr. Mulley: That would be convenient. They deal with different points. One point is the period of qualification and the other is the amount of benefit, but it would be convenient to debate them together.

Mr. Page: It is true that they deal with different aspects of the same subject. They are, however, interdependent.
I undertook in Committee to look again at the length of the qualifying occupancy period for home loss payments and at the formula for calculating the amount payable. I decided to reduce the eligibility to five years' occupancy in place of the seven years which appeared in the Bill as drafted and to put a minimum payment—a floor, as it were—of £150, as well as, the ceiling, in the Bill, of £1,500.
The amendments arose in this way. It was evident from the debates in Committee that the period of seven years was regarded as too long. Therefore, I sought to choose a period related to the establishment of a home. It is true that a home may be established in a shorter period of years, but we want to avoid attracting the speculator who may endeavour to take advantage of the home loss payment. If we go below these figures, we feel that we shall get into the world of the speculator.
After the Bill was drafted, we decided to introduce the benefit to the furnished tenant. It is evident that there will be furnished tenants in properties with a very low rateable value. When one starts to apportion the rateable value of a house let off in bed sitting rooms as separate dwellings, the rateable value becomes


very small. Therefore, the floor of £150 will benefit the furnished tenant in particular.
We considered whether we should entirely divorce these home loss payments from rateable value in making a flat rate across the board. The arguments in favour of that were persuasive in that what we are compensating here is not based on the value of the bricks and mortar, but on the value of a home to the householder who has lived there for a period of time. It could be argued that a home is a home whether it be a hovel or a mansion. But I think there is some point in relating it to rateable value, not merely because a large house is obviously of a different value than a cottage, but because of the relationship of the value of money to the home owner. We are trying to compensate the feeling of loss and grief felt by the home owner who is turned out. I have stuck to the principle in terms of the rateable value in the Bill, but I take the point that it is fixed over too long a period. We have reduced it to five years.
I know that I have not met all the arguments on this matter—indeed, the Opposition wanted to reduce the period to three years, and in one case sought no qualifying period at all. But I feel that we need a fairly substantial period to ensure that a home is established, and I believe that the choice of basing the payment on rateable value was right. The amendments thus bring those two principles, embracing five years and £150, into operation in the Bill.

1.30 a.m.

Mr. Julius Silverman: We on this side of the House still think that five years is too long. I appreciate the necessity for having some restrictive period, but a home is a home whether it has been established for two, three, four or five years, and the person ejected from such a home will suffer the same hardship, grief and disturbance. I appreciate that it is necessary to have some qualifying period simply to prevent what the Minister called the speculator, or perhaps a tenant in London who "jumps the gun" by getting into a clearance area in the hope of being rehoused with others. I think that three years would be ample to prevent a person deliberately beating others in the queue for housing. I hope the Minister will reconsider the period.

Mr. Goodhart: As I pressed my right hon. Friend on this point in Committee, I congratulate him on the amendment he has moved. We must have been more persuasive than we thought, for he has wrung a major concession from the Treasury.
By my reckoning, lowering the period of occupancy from seven to five years and bringing in furnished tenants and the "floor" payments, will add £4 million a year to the cost of this Bill. With this and related Amendments we are paying out four times as much as we shall receive in one year in the contentious museum charges. So this is no small matter and I think it will be a major benefit.
In Committee I tried to show that the seven-year provision would rule out 46 per cent. of Greater London residents from home loss payments if their property was taken over. I estimate that under this amendment two-thirds of Greater London residents will be eligible for home loss payments if their property comes into this category. That is no small matter when one thinks of the ringway proposals and the Greater London Development Plan which have received broad approval. I congratulate my right hon. Friend. As he knows, I was in favour of sliding scale payments. I should like to see payments begin from three years once rateable value to six years, twice rateable value going from six to nine years and three times from nine years onwards. At this late hour I will not press that argument nor cavil about the major concession which my right hon. Friend has won from the Treasury.

Mr. Rowlands: I feel I am an odd man out because the argument has gone the wrong way in the decision taken by the Minister. But the generous spirit in which he has allowed us to debate the issue and allowed us to discuss various possibilities has been a marvellous example of open and participatory government. However, by shortening the period but nevertheless repaying those with more expensive properties with higher home loss payments than those with poorer properties, the Minister has succumbed to a metropolitan rather than a provincial solution.
If one considers the cases that one meets in industrial South Wales and in


my constituency where the vast majority of home loss is due to slum clearance or redevelopment of the oldest and poorest properties, one realises that the use of rateable values to which the hon. Gentleman has stuck rather than the flat-rate solution which I consider to be preferable militates against the payment of proper compensation for the home loss by people at the lower end of the housing scale.
Even on the right hon. Gentleman's argument the use of rateable value is unfair. The right hon. Gentleman's argument in Committee—and it was a little disingenuous of him to try to modify it tonight—was that home loss payment was not related to true compensation or to the physical condition of the property, but was a payment for grief and loss of the home. To people who have lived in a home for perhaps 70 years, three years or seven years is irrelevant.
In the provinces and in areas like mine the rateable value assessment will mean that even with a limit of £150 occupants of the poorer houses will find that there is a shortfall. Our proposal for £250 is a better bet because, as we worked out in Committee, the difference in the proposed home loss payments would mean between £50 and £60 for the householder at the poor end of the scale. I suggest that in terms of home loss, in the average property in industrial South Wales or in the provinces the loss can be greater than in the more expensive properties in metropolitan London.
Perhaps it is the Government's decision to endorse the views of the Lay-field Committee that has swayed the argument, because there will as a result be home loss in areas right across the spectrum. The Minister has found in favour of the wealthier end of the housing scene and militated against the lowest. For that reason I should like him to reconsider his decision and put in a £250 floor level, with some rateable value topping up.
I did not press the matter in Committee because I hoped that rateable values would not be the basis of home loss. At column 311 in Committee I asked the Minister about the effect of home loss payments where rateable values were altered during the course of construction. The right hon. Gentleman promised to look at that. Perhaps he

will consider that further in the light of his decision, to use rateable values. I regret the decision, because I prefer the flat-rate system.

Mr. Moate: My right hon. Friend has secured a major concession in the sense of reducing the loss period to five years and providing a minimum of £150. It would be ungracious not to concede that, but I am a little disappointed that he has decided on five years and not a lower figure. There was a sound argument for saying that there should be no figure. One could argue that every loss of a home through compulsory purchase is an assault on the person's rights, and I think that an individual should be entitled to compensation for that factor alone. Nevertheless, one can understand that there is a sustainable argument. One becomes attached to a house more after a period, and my right hon. Friend argued that this is essentially a payment for grief. On that argument the public would understand the grounds on which that compensation was calculated.
My right hon. Friend used another interesting phrase in Committee when he said:
… it should be a payment for exceptional personal grief or frustration of the residential occupier forcibly displaced …
It was the word "or" which caught my attention—"or frustration". I submit that a man who moves into his home only to find in a year or two that it is to be purchased compulsorily is likely to be more frustrated than a person who has lived in his home for a number of years. His anger would be considerable.
I was surprised to hear that the cost of the three-year clause was estimated to be only £24 million compared with £17·5 million for the seven-year period, and I should have thought that a difference of that order could be contemplated by the Government.
In the same sitting of the Committee, my right hon. Friend concluded by saying:
Let the debate continue until the Bill reaches the Statute Book because we want this new right compensation or concession for those who are being turned out of their homes. And we want to get it right."—[OFFICIAL REPORT, Standing Committee A, 23rd January 1973; c. 267–9.]
We are not yet at the final stage of the Bill, and I suggest that there is no need


to pass this amendment now. Why not leave it until the Bill reaches another place so that it may be debated there? In that way the question will be left open for other views to be heard.

Mr. Mulley: I endorse what my hon. Friend the Member for Merthyr Tydvil (Mr. Rowlands) said about the generosity and open-mindedness of the Minister throughout our deliberations. I am only sad that the right hon. Gentleman's conclusion in this case has not been as characteristically generous as some of his other decisions.
I have much sympathy with the remarks of the hon. Member for Faversham (Mr. Moate) that we have not reached the end of the consideration of the Bill and that, while we accept that more generous provision would cost money in the total involvement and in order to get people outside to feel we are beginning to try to compensate people for all that is involved in their private interests being overriden in the public interest, another £7 million might be worth spending, especially as I am rather suspicious about the basis of a lot of the figures. It must be rough and ready estimating. We cannot tell down to the last million what is likely to be involved.
While we pressed for the inclusion of furnished tenants, by taking five years I think that a lot of furnished tenants will not qualify. It is the exception rather than the rule for people to stay in the same furnished premises for more than five years, especially in London. People are seeking to get unfurnished accommodation or to buy their own homes. Usually they do not want to stay in furnished premises for as long as five years. There are two separate but related points here. I hope that the Minister will look again at both of them and, if possible, persuade his colleagues that another £7 million is worth spending.
As my hon. Friend the Member for Birmingham, Aston (Mr. Julius Silverman) said, five years is still too long. It looks as if, we having proposed three, many people outside having proposed three, and the original Bill saying seven, the Government have taken the midway point and said five. I think that five is too long. For many people, the time that they feel proudest about their homes is when they have just got everything right.

Anyone moving into a house knows that it probably takes two or three years to get the garden right and to get the place furnished and decorated to one's taste. If after about two or three years a compulsory purchase order came along, a house owner would possibly feel a much greater sense of deprivation than if it happened after 10, 15 or more years when perhaps it would not be as serious a matter for them to move.
1.45 a.m.
I agree that it is an extremely difficult matter, because individual cases vary enormously, but I wonder whether we could not get the period a little below five years—although, as my hon. Friend the Member for Aston said, we accept that there must be a qualifying period because we would not want to encourage people to move from one place to another seeking to accumulate one home loss payment after another.
It is unfortunate that the Bill and the White Paper which came before it are couched in terms both of rateable value and of a maximum of £1,500. This may have inhibited the Government from looking at the solution proposed in Committee, I think from both sides, that a flat-rate payment would have been more appropriate if it was not intended in any way to be related to the value of the property—the bricks and mortar, as the Minister said—but was meant to be some kind of compensation for the grief and sorrow of having to surrender a home and move elsewhere. A flat rate would have been much preferable to the heavily graded payment now in terms of rateable value, even though we are of course glad that the Minister has accepted my suggestion that there should be a minimum as well as a maximum.
I still think that a minimum of £150 is much too small. With the new rateable values, council houses in my constituency in Sheffield which are 20 or 30 years old will be rated between £100 and £150, so that the number of people who will benefit by the minimum of £150 will not be numerous.
These are both points on which many people outside have made adverse comment, although in each case the position is better than when the Bill was introduced. We hope that in the process of further consideration the Minister might be able


to persuade his colleagues to be a little more generous on both points. I certainly hope that he may continue to try.

Mr. Graham Page: We have discussed these points many times and I do not think that it would be profitable for me to try to answer them as they have come forward. I must let the Bill go to another place with a firm decision on these lines from this House, although I know that it is not agreed by both sides. If another place further debates the matter and sends it back to us with other figures, we must consider it again. I should not, however, like to give any undertaking at this stage that between now and the matter being dealt with in another place I would be able to alter the amendments which are now on the Amendment Paper.
These are the figures which go as far as we can go at the moment on this type of compensation. If we spend a lot of money on one form of compensation, obviously we deprive ourselves of putting right anomalies elsewhere. In the Bill we have used a lot of money, if I may put it this way, in tidying up small hardships. Had we concentrated on one major item of compensation, we should have been unable to spread it over the rest.
I should call attention to the fact that one of the amendments which we are asking the House to approve is a small one—No. 48—which will enable the Secretary of State by order to change both the minimum and the maximum. If later we find that this form of compensation is not working very well, the Secretary of State will be enabled by order to bring before the House a change in those figures. We might find that we could bring up the minimum more to the figure which the right hon. Member for Sheffield, Park (Mr. Mulley) would wish it to be.
Therefore, it is flexible even after the Bill has become law. But I would wish it to go forward at the moment on the basis of these amendments, and then we shall see. If it comes back to us from another place we shall have to debate it again.

Amendment agreed to.

Mr. Mulley: I beg to move Amendment No. 39, in page 24, line 38, at end insert:

'(5) For the purposes of this section a person displaced from land owned by a local authority shall be treated in the same manner as a person displaced in consequence of the circumstances set out in subsection (I)(a), (1)(b) and (1)(c) above'.

Mr. Deputy Speaker (Miss Harvie Anderson): It may be to the convenience of the House if with this amendment we take the following:

Amendment No. 66, in Clause 33, page 33, line 3, at end insert:
'(4) For the purposes of this section a person displaced from land owned by a local authority shall be treated in the same manner as a person displaced in consequence of the circumstances set out in subsection (1)(a), (1)(b) and (1)(c) above'.
and Amendment No. 72, in Clause 34, page 35, line 16, at end insert:
'(7) For the purposes of this section a person displaced from land owned by a local authority shall be treated in the same manner as a person displaced in consequence of the circumstances set out in subsection (1)(a), (1)(b) and (1)(c) above'.

Mr. Mulley: This series of amendments is designed to deal with problems that I feel may arise in respect both of home loss payments and disturbance allowance, and also possibly the right to rehousing in circumstances which may concern persons who are already tenants of a local authority and who find that their premises are required in order that a road may be built or for some other change of use by the local authority.
I know that the Minister has been concerned to see that, all things being equal, a council tenant living in a street where demolition occurs should receive the same benefits as the tenant of a private landlord would receive in similar circumstances. As the Bill is drafted, I am not sure that even the words that were inserted in Committee would be sufficient to make this absolutely certain. For example, I am not sure whether the words
for the purposes for which it was acquired or appropriated
would be sufficient to deal with the kind of case which I have in mind. On a fairly new council estate it may be necessary, for the purpose of providing a new road, to take away two or three houses. I think my hon. Friend the Member for Stoke-on-Trent, Central (Mr. Cant) gave an example in Committee from his own constituency, where two or three houses


may have to be demolished for the construction of a road. I do not know whether that would be caught by the words "appropriated" or "redevelopment".
Another difficulty that I have in mind exists currently in my own constituency, and we are awaiting the outcome of our proceedings on this Bill. A small self-employed cutler—known in our part of the country as a "little mister"—has had to move from premises that he rents from the corporation for road development, the corporation many years ago having acquired those industrial premises. It is not certain that he will qualify under the words "appropriated" or "redevelopment".
There is a third example, which was mentioned in Committee. In a certain area some council property may be acquired for the purpose of road construction, and then it may be decided not to build the road but to use the property for a school or for some other public purpose.
Would cases of that kind be covered? While in the great majority of cases I am satisfied that local authorities will be anxious to carry out the letter and the spirit of the law, there are bound to be some local authorities which will take as restrictive a view as possible of the measure for financial and other reasons, and I should not like the Bill to be left in such a form that it has to go to another place acting in its judicial capacity before it is clear whether or not this or that circumstance is covered. I am sure that it is the wish of both sides of the House that people who happen to be council tenants in the wider sense, not strictly in the normal sense of occupying council houses, but also tenants of commercial, industrial and often slum property, should be covered for all the benefits that we intend.
There is also the problem that the tenancy is often on a monthly basis, as all council tenancies are, and an unscrupulous council, prior to formally resolving that an area should be cleared, could give all those involved notice to quit, and that would often deprive a tenant of the benefits. It might be argued that a private landlord could do the same, but he is not likely to bother, for he does not have to foot the bill, as the council

has to foot the bill, for the substantial benefits that we hope—and I say "we hope" because we are not sure—that the Bill will confer.
There is thus an important distinction between private tenants and those who, for whatever reason, are the tenants of a local authority. I accept that my wording may be somewhat clumsy, but we clearly intend to ensure that, whatever the circumstances, someone who is a council tenant will qualify for the benefits of the Bill just as will the tenant of a private landlord; we want both kinds of tenants to be on exactly the same footing.
I doubt whether council tenants are similarly covered for home loss payments, disturbance payments and the rehousing obligations, and I am sure that the Minister wants them to be so covered.

Mr. Graham Page: I seem to have reached that stage of the Bill where I dig my toes in, for I cannot advise the House to accept the amendments. They provide that when a person is displaced from land owned by a local authority, in any circumstances and for any reason, he shall be entitled to benefit from the provisions relating to the home loss payment, the disturbance payments and the rehousing obligations and shall be entitled to benefit as though he had been displaced in consequence of one of the events specified in subsection (1), such as compulsory purchase, housing orders, redevelopment and so on.
This throws the whole scheme wide open. It would enable the tenant of a local authority who merely receives notice to quit to make a claim to get the benefit of, say, the home loss payments. The amendments fail to recognise that the roles of the local authority, as a housing and property manager and as an authority empowered compulsorily to acquire property for statutory purposes, are distinct.
I doubt whether any local authority would operate its landlord and tenant powers so as to deprive a tenant of the right to those payments, that is to say, would serve a notice to quit, when it knew perfectly well that in due course it would have the right to require possession from the tenant as a result of wanting to develop the property.
2.0 a.m.
Acceptance of the amendments would place an onerous burden on local authorities in carrying out their housing or property management functions. For example, authorities could not move their residential tenants in the course of normal housing management or gain possession of tenanted business property under the Landlord and Tenant Act 1954 without incurring a liability to make these kind of payments and to meet rehousing obligations corresponding to a compulsory purchase of private property.
As the Bill stands, and by reason of amendments made in Committee, we have tried to make certain that where the eviction arises because the property is to be developed, or comes within some scheme for development, the home loss payments and the rest of the benefits of that kind will come into operation.
I am sure that the clause as drafted will catch all those cases about which the right hon. Gentleman expressed concern. It would be an extraordinary authority which deliberately tried to defeat the clauses now in the Bill. I do not know how we could reasonably try to guard against that. Certainly the amendments go too far and would make the housing and property management side of a local authority's duties almost impossible to operate.

Mr. Mulley: I am glad to have the Minister's assurance that the cases that I have in mind will be covered by the Bill as drafted. I look forward to seeing whether there are any adverse cases after the Bill comes into force.
I accept that my amendment is defective in drafting because it can be construed in the wider context that the right hon. Gentleman has explained. I do not wish to hamper the proper housing functions of local authorities. Therefore, having received the assurance that I was seeking, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Mr. Rowlands: I beg to move Amendment No. 40, in page 24, line 39, leave out subsection (5).
When we debated this subsection in Committee we found ourselves with a schizophrenic Minister and an equally

divided Committee. The Minister said at various times that he thought the amendment was a good idea and at other times that it was not. Usually he found that his other self was beaten by the realistic, pragmatic self. The Committee endeavoured to help him to make up his mind which side he should support, and the result was eight for and eight against the subsection. Only the casting vote of the Chairman saved it.
Whatever the particular difficulties that the Minister has had debatinig with himself on the issue of the division of the Committee, this is the second area where there has been unanimous condemnation by every organisation, professional body and the particular group concerned with these matters. They have universally recommended that the subsection should be deleted in order that people who serve blight notices, not in a voluntary sense to compel the local authority, but because they are under the threat of development, of being evicted or of being displaced in future, and therefore take an unnatural course of action to find themselves an alternative home should not be deprived of the home loss payment.
In Committee one of the Minister's repeated arguments was that we did not understand blight notices. According to his interpretation, a blight notice is a marvellous voluntary act in which an individual shelves his responsibility by forcing, the local authority to buy in order that he may move away from home or for other compelling reasons of hardship, health, and so on. That in most instances is so when a person serves a blight notice, but he serves that blight notice because he knows that the local authority which accepts it will purchase or acquire the property in due course. In other words, that home is already under the threat of some action by the authority at a future date. I cannot see the justice of the argument that, if a person under the duress of a threatened development or displacement serves a blight notice because of his domestic and family circumstances, he should then be deprived of the home loss payment.
I know that the Minister has said that, under subsequent clauses, if there is agreement between the local authority and the individual, the notice is not served and there is agreement to acquire beforehand, a home loss payment can be made. But


there are many cases—in Committee, I quoted some from my own constituency—in which blight notices have been and will be served, not by agreement but because the individual is under duress of a known future development or displacement. If the subsection is not removed, these people will be deprived of home loss payments.
This is of particular significance to a later Clause, under which we give an extra power for a blight notice to be served when people are threatened by compulsory purchase orders in clearance areas. This gives one power to the householder, but if the subsection remains, it will take away an invaluable home loss payment.
I plead with the Minister, in no spirit of bitter criticism. He has recognised that there are genuine arguments for and against this subsection. In another place, the weight of the opinion of outside bodies will mean that the same arguments come up again. Although he has said that he has dug in his toes on some recent amendments, I hope that he will now swing back to his marvellous earlier spirit of generosity and say that the subsection should be deleted.

Mr. Graham Page: I wish that I could comply with the hon. Member's wishes and delete subsection 5, but I am still of the same mind. With all respect to him, lie is not interpreting blight notices as they were intended by the statute, and indeed as the provisions of the relevant statute define them.
A blight notice comes about because, when a property is subject to some scheme which will eventually result in the compulsory purchase of the property, at that stage, when the acquiring authority or the local authority does not wish to take over the property, the owner-occupier wishes, for some purpose, to move out of it. He is not forced out at that stage by the scheme, but he take the initiative and has the benefit of the statute in serving a purchase notice on the acquiring authority, and saying, "Because I want to get out of this house, or have to get out of it for some other reason than its immediate acquisition, I serve you with this notice. I cannot sell it at a reasonable price, and I call on you to buy it from me."
That is not the sort of circumstance for which we are providing for a home loss payment. The home loss payment is for circumstances in which the owner-occupier has been displaced, in which he has been evicted because of a compulsory purchase order. When he taking it into his own hands to sell his property and leave before the date by which the acquiring authority would evict him, that is not a case for a home loss payment.
I am afraid that I must stick to my guns on this one, and advise the House to reject the amendment.

Amendment negatived.

Amendments made: No. 41, in page 25, line 13, leave out 'or resolution' and insert ', resolution or undertaking'.

No. 42, in line 16, leave out 'or'.

No. 43, in line 17, at end insert:
'or an undertaking accepted under section 16(4) of the said Act of 1957, section 60(2) of the said Act of 1969 or section 15(4)(i) of the said Act of 1966'.—[Mr. Graham Page.]

Mr. Mulley: I beg to move, Amendment No. 44, in page 25, line 17, at end insert:
'(8) In this section "dwelling" includes a caravan on a permanent caravan site'.
I move the amendment in the absence of my hon. Friend the Member for Renfrew, West (Mr. Buchan), who raised this point in Committee and received a very sympathetic reply from the Minister. The short point is that it would seem, under the Bill as at present drafted, that the owners and occupiers of caravans on permanent caravan sites will not have the benefit of a home loss payment if the site on which the caravan is located becomes subject to a compulsory purchase order or the other provisions under which the home loss payment would come into being.
To the owner of a caravan, especially in an area where it is exceedingly difficult to find another permanent site, leaving the caravan would mean just as great a loss and sense of grief as leaving a more orthodox permanent dwelling would be to people who had become attached to it.
Clearly, the owners of the caravan would have to have lived on the site for the same qualifying period and would have to qualify under all the other provisos. In my hon. Friend's constituency,


where I think that there are two such sites, it is very unlikely that a similar site could be acquired, so people would have to give up living in a caravan and hope that the local authority, in these circumstances, would find them accommodation in houses or flats.
The Minister has described the home loss payment as compensation for the loss of a home. In that sense, it should equally apply for caravan dwellers who have lived on a permanent caravan site for five years. While my lion. Friend's drafting may not be of a standard sufficient to earn a permanent place in the legislation, we hope that the principle can be accepted and, if necessary, it could be put into more eloquent language at a later stage.

Mr. Graham Page: The amendment is similar to a new clause moved in Committee by the hon. Member for Renfrew, West (Mr. Buchan). I undertook in Committee that the Government would wish to provide that those who lose their permanent home, whether it be mobile or otherwise, should receive home loss payment. I said that I could not promise to produce the proper amendment by Report stage.
The hon. Member for Renfrew, West has produced an amendment which would not be satisfactory as it stands. However, my undertaking still stands. I apologise for not having been able to produce a satisfactory amendment at this stage, but consideration is being given to the ways of bringing caravan dwellers into the home loss payment scheme. I have set my officials and the parliamentary draftsmen a very difficult problem on this matter, but no doubt it is an admirable subject for another place.

Mr. Mulley: The Minister does not need to apologise. The point was raised very late in the proceedings of the Committee, and we have come to the consideration of the Bill rather soon, as the Minister's officials have found, I think, judging by the stars on Government amendments, which are very unusual.
We understand the position. I take this opportunity to say how very much we appreciate the tremendous work done by the officials in the Department in producing the Bill and servicing the Committee throughout. Certainly this is no

criticism. My hon. Friend the Member for Renfrew, West probably tends to get reminders from his caravan dwelling constituents to put gentle reminders to the Minister.
We are absolutely delighted by the further assurance and look forward to the more elegant form of the amendment in due course.

I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 27

AMOUNT OF HOME LOSS PAYMENT IN ENGLAND AND WALES

Amendments made: No. 46 in page 25, line 28, at end insert 'and a minimum of £150'.

No. 48 in line 30, after 'maximum', insert 'or minimum'.—[Mr. Graham Page.]

Clause 28

AMOUNT OF HOME LOSS PAYMENT IN SCOTLAND

Amendments made: No. 49 in page 26, line 15, at end insert 'and a minimum of £150'.

No. 51 in line 17, after 'maximum', insert 'or minimum'.—[Mr. Graham Page.]

Clause 29

SUPPLEMENTARY PROVISIONS ABOUT HOME LOSS PAYMENTS

2.15 p.m.

Mr. Graham Page: I beg to move Amendment No. 52, in page 26, line 43, after '(1)', insert:
'Subject to subsection (7) below,'.

Mr. Deputy Speaker (Miss Harvie Anderson): I understand it will be convenient also to discuss Amendment No. 57, in page 28. line 3, at end insert:
'(7) Where the date of displacement is before the passing of this Act the period within which a claim to a home loss payment can be made shall be the period of six months beginning with the date of the passing of this Act'.

Mr. Page: Amendment No. 52 is consequential upon Amendment No. 57


which is necessary to fill a gap. It affords to those eligible to a home loss payment who are displaced before the passing of the Act a period of six months after the passing of the Act within which to make a claim. If we do not provide for this those who are displaced in this transitional period would lose out. The period of six months corresponds to the period during which those claiming must be displaced after the passing of the Act.

Mr. Rowlands: I had not realised the significance of the amendments. The six-month period relates to those who might have been displaced between October last year and the passing of the Act, I assume. I hope the Minister will take the most energetic measures to publicise the fact that those who have already been paid normal compensation and gone to other homes will be made aware that they can make this claim. I should like to see through regulations or by circulars a bounden duty placed on local authorities where they have caused displacement to notify people of the possibility of a payment under the Bill.

Mr. Graham Page: Yes, we are considering the best way to make public the information and bring it to the attention of those who may have a right before the Act comes into operation which they can exercise for a period of six months afterwards in some cases, and a year in others. We are still considering the best form of publicity for this, and I hope that it will be effective when we have thought it out well.

Amendment agreed to.

Mr. Graham Page: I beg to move Amendment No. 53, in page 27, line 18, leave out from 'if' to 'successively' in line 19 and insert:
'another person was, or other persons'.

Mr. Deputy Speaker: It will be for the convenience of the House if with it we also take Amendments No. 54, in page 27, line 21, leave out from 'that' to 'ended' in line 22 and insert:
'other person or, as the case may be, each of those other persons'
No. 55, in line 25, leave out subsection (4); and No. 56, in page 27, line 37, at end insert:
'and in paragraph (b) above any reference to a person's sister or brother includes a reference to any step sister or step brother'.

Mr. Page: This group of amendments follows an undertaking that I gave to look again at the question of inheriting an interest in a dwelling for the purpose of qualifying for a home loss payment.
We had some considerable discussion in Committee about which members of the family should benefit if they survived the person originally entitled to benefit. I came to the conclusion after reading the debate again and carefully considering it that the best thing would be to sweep it all aside and deal with the inheritor, being the person who had lived in the house for a qualifying period although they were not the owners of the house.
Take for example, the companion where the owner of the house has died and there may be no relationship. There is no reason why that person who has lived happily in that home for a qualifying period should not be entitled to a payment if the home is taken away. The combined effect of the Amendments will be to confer eligibility on a person who has occupied a dwelling or a substantial part of it as his or her only or main residence for the qualifying period, which is now five years, provided that, first, on the date of displacement he or she held a qualifying interest or right, and, secondly, that another person held a continuing qualifying interest or right and had occupied the dwelling as his only or main residence, and his occupation ended with his death, and the total period for which the deceased person held that qualifying interest or right together with the period for which the claimant held a qualifying interest or right, is five years or more.
That sounds rather a complicated formula, but it merely means that where two people live together and the one primarily entitled to benefit dies, the other, with the five-year qualifying residence, should receive a home loss payment if thereafter he or she loses the home by compulsory acquisition.

Mr. Mulley: The simplification of the relationships will be welcomed. I think that the amendment of my hon. Friend the Member for Widnes (Mr. Oakes), who took an interest in the matter in Committee, was put down before we saw the Minister's amendments, and that it is now covered. If I am right in thinking that step-sisters and step-brothers are covered by the wider form of benefit that


the Minister proposes, I shall not wish to move Amendment No. 56. I should like the Minister to confirm that, so that I can advise my hon. Friend when I see him. I am sure that it will be the first thing he will want to know when he returns to the House on Monday. I should like to be clear that the form of words proposed will cover not only that point but the wider question of relationships more accurately and in a better way than by trying to set out a hundred and one varieties in the clause.

Mr. Page: The amendment of the hon. Member for Widnes (Mr. Oakes) is unnecessary. I, too, compliment the hon. Gentleman on raising the point in Committee and giving us an opportunity to deal with it in the Bill.

Mr. Rowlands: The original subsection excluded sisters and brothers. Now we have had this redefinition of the family. The original definition was taken straight out of Schedule 6 of the 1969 Housing Act. In view of the broadening of the definition of the family for compensation, will the Minister now use the Bill to amend that Schedule so that the definition of the family for other forms of compensation may also include sisters or brothers, or all members of the family as the right hon. Gentleman has now defined it in his amendments?

Mr. Page: I am sure that I should be ruled out of order if I pursued that point.

Amendment agreed to.

Amendments made: No. 54, in page 27, line 21, leave out from 'that' to 'ended' in line 22 and insert:
'other person or, as the case may be, each of those other persons'.

No. 55, in line 25, leave out subsection (4).

No. 57, in page 28, line 3, at end insert:
'(7) Where the date of displacement is before the passing of this Act the period within which a claim to a home loss payment can be made shall be the period of six months beginning with the date of the passing of this Act'.—[Mr. Graham Page.]

Clause 32

SUPPLEMENTARY PROVISIONS ABOUT FARM LOSS PAYMENTS

Amendments made: No. 58, in page 31, line 1, after '(1)' insert:

'Subject to subsection (6) below,'.

No. 60, in line 34, at end insert:
'(5) A farm loss payment shall carry interest, at the rate for the time being prescribed under section 32 of the Land Compensation Act 1961 or, in Scotland, section 40 of the Land Compensation (Scotland) Act 1963, from the date mentioned in subsection (1) above until payment.
(6) Where the date mentioned in subsection (1) above is before the passing of this Act the period within which a claim to a farm loss payment can be made shall be the period of one year beginning with the date of the passing of this Act'.—[Mr. Graham Page.]

Clause 33

DISTURBANCE PAYMENTS FOR PERSONS WITHOUT COMPENSATABLE INTERESTS

Amendments made: No. 61, in page 31, line 40, leave out
'or passing of a housing order or resolution'
and insert
', passing or acceptance of a housing order, resolution or undertaking'.

No. 62, in page 32, line 8, leave out
'or passed the resolution'
and insert
', passed the resolution or accepted the undertaking'.

No. 63, in line 26, leave out 'or resolution' and insert
', resolution or undertaking'.

No. 64, in line 46, leave out 'or resolution' and insert
', resolution or undertaking'.

No. 65, in page 33, line 2, leave out
'or the resolution was passed
and insert
', the resolution was passed or the undertaking was accepted'.—[Mr. Graham Page.]

Mr. Mulley: I beg to move Amendment No. 67, in page 33, line 10, at end insert:
'; and
(c) in the case of a disabled person, the reasonable expenses incurred in structure modifications of his new home to meet the special needs of a disabled person'
The subject was discussed at some length in Committee, but we did not have an amendment in this form before us. We had a lengthy discussion on the old Clause 36, which is now Clause 39, concerning the provisions which the Bill rightly makes for the problem of the disabled persons who have compensatable interests.


Account can be taken of that in the compensation they have for their propetry.
I am now particularly concerned about disturbance for disabled people who do not have such compensatable interests but who should also have special consideration for the expenses they are put to when they are forced to move home and they or others have to make modifications to the new home in order to meet the special needs of a disabled person.
It is possible that this can be achieved in any event as part of the reasonable expenses to be provided under subsection 4(a) of Clause 33, but it could well be a source of argument as to whether structural alterations like the widening of doors or gates or putting up a ramp for an invalid carriage would be covered by the Clause as drafted.
I accept that the amateur and hasty draftsmanship of the amendment may not do, but I think the principle generally commends itself to both sides of the House. I hope, therefore, although the hour is late, the Minister, having passed his digging-in period, will agree to look at this point or, to my immense surprise, will accept the amendment as it stands.

Mr. Goodhart: When I move a similar amendment in Committee I said I believed that the whole Committee thought that disabled people forced to move home should not be put to any extra expense because of their disablement. I therefore support what the right hon. Member for Sheffield, Park (Mr. Mulley) has said. Amendment No. 37, on which I spoke earlier, will cost a great deal of money. This amendment should not cost very much money, but it will do some people good and I hope that my right hon. Friend will accept it.

Mr. Eldon Griffiths: I promised to write to the right hon. Member for Sheffield, Park (Mr. Mulley) about this matter and I expect shortly to do so. I am glad to say that provision already exists to meet the case he is concerned about—that of the disabled tenant who moves from one council house to another.
First, the local housing authority has power under the 1957 Housing Act to carry out adaptations that a house may

need for the benefit of a tenant, and this includes adaptations for disabled tenants. Quite separately, the Chronically Sick and Disabled Persons Act 1970 contains an obligation on the social services department of a local authority to satisfy itself as to whether adaptations for the sake of disabled tenants are needed, and where it is so satisfied an obligation is placed on the authority to have the adaptations carried out.
This double provision therefore takes care of the concern which the right hon. Gentleman expressed. Nevertheless, we have given further thought to the point and to the representations made by my hon. Friend the Member for Beckenham (Mr. Goodhart), and while, as the right hon. Gentleman modestly said, his amendment required a little tidying up, my right hon. Friend is prepared to accept it, subject to such changes and modifications as may be needed by the parliamentary draftsmen to achieve the purpose we all want to achieve.

2.30 a.m.

Mr. Mulley: I am very much obliged to the Minister. If I had known that the amendment would be accepted I would have polished it up a little. I would have imported the definition of a disabled person from Clause 39. No doubt that can be attended to. All those concerned with disabled people will be grateful to the hon. Gentleman.

Amendment agreed to.

Amendment made: No. 68, in page 33, line 25, at end insert:
'(8) A disturbance payment shall carry interest, at the rate for the time being prescribed under section 32 of the Land Compensation Act 1961 or, in Scotland, section 40 of the Land Compensation (Scotland) Act 1963 from the date of displacement until payment'.—[Mr. Graham Page.]

Clause 34

DUTY TO REHOUSE RESIDENTIAL OCCUPIERS

Amendment made: No. 69, in page 34, line 1, leave out
'or passing of a housing order or resolution'
and insert
'passing or acceptance of a housing order, resolution or undertaking'.

No. 70, in page 35, line 13, leave out 'or resolution' and insert
',resolution or undertaking'.

No. 71 line 15, leave out
'or the resolution was passed'
and insert
'the resolution was passed or the undertaking was accepted'.—[Mr. Graham Page.]

Clause 35

POWER OF RELEVANT AUTHORITY TO MAKE ADVANCES REPAYABLE ON MATURITY TO DISPLACED RESIDENTIAL OWNER-OCCUPIERS

Amendment made: No. 73, in page 37, line 16, leave out subsection (11) and insert:
'(11) Subsection (6) of section 34 above shall have effect in relation to subsection (1)(a) and (b) of that section as applied by subsection (1) above'.—[Mr. Graham Page.]

Clause 38

COMPENSATION FOR INJURIOUS AFFECTION

Amendment made: No. 74, in page 40, line 10, leave out subsection (2).—[Mr. Graham Page.]

Clause 40

COMPENSATION FOR DISTURBANCE WHERE BUSINESS CARRIED ON BY PERSON OVER SIXTY

Amendments made: No. 75, in page 41, line 14, after '(b)', insert 'on that date'.

No. 76, line 34, leave out 'in this subsetcion'.—[Mr. Graham Page.]

Mr. Graham Page: I beg to move Amendment No. 77, in page 42, line 16, leave out from 'company' to end of line 21 and insert:

'(a) as if section (1)(a) above required—

(i) each shareholder, other than a minority shareholder, to be an individual who has attained the age of sixty; and
(ii) each minority shareholder to be an individual who either has attained that age or is the spouse of a shareholder who has attained that age; and

(b) as if the undertakings mentioned in subsection (3)(b) above were required to be given both by the company and by each shareholder.

In this subsection "shareholder" means a person who is beneficially entitled to a share or shares in the company carrying voting rights and "minority shareholder" means a person

who is so entitled to less than 50 per cent. of those shares'
In Committee I undertook to table an amendment to provide that a younger spouse's minority interest in a company should not disqualify a claimant of 60 years or over. This Amendment fulfils that undertaking.

Mr. Mulley: I greatly appreciate the Minister meeting this point, which I raised in Committee. As he knows better than I it is necessary to have two shareholders in a company and in many cases difficulties arise if the elderly majority shareholder cannot find anyone above the age of 60 in his family to be the other shareholder. That point is now met.
We still have the problem of the bachelor, spinster or widow, who would not have a spouse as a possible second shareholder. There could still be difficulty, with the clause as amended. The Minister told us that in his former practice he was often a minority shareholder. I imagine that the time factor would be such that that could be disposed of to someone over the age of 60. It may be that solicitors' offices have a clerk over the age of 60 to act as a shareholder in such cases. I hope that some way can be found of meeting the case.

Mr. Graham Page: I am conscious of the fact that I gave an undertaking to look at this matter. I am still examining the case where frequently one share is held by a professional adviser. I boggle at the idea of the fictitious elderly pensioner in the office building who holds all the shares in the companies. We must not look at the matter as a fictional matter. My officials are still looking into the subject, and I hope that we shall be able to produce something in another place.

Amendment agreed to.

Clause 48

EFFECT OF COUNTER-NOTICE UNDER SECTION 47

Mr. Eldon Griffiths: I beg to move Amendment No. 78, in page 52, leave out lines 18 to 26 and insert:

'(a) the notice of entry shall be deemed to have extended to the part of the holding to which it did not relate; and
(b) the acquiring authority shall be deemed to have taken possession of that part in


pursuance of that notice on the day before the expiration of the year of the tenancy which is current when the counter-notice is so accepted or declared'.

I think that it might be convenient also to discuss Amendments Nos. 86, 87 and 88.
The purpose of this amendment is to provide the date on which the authority shall be deemed to have taken possession for the purpose of the clause. It is reasonable that the tenant should continue in possession and go on farming until the expiry of the current year of his tenancy. This is in line with a fundamental principle of the compensation code.
The amendment provides that the authority shall be deemed to have taken possession on the day before the expiry of the current year of his tenancy. The practical effect of inserting this date will be that the tenant would receive as a minimum under New Clause 1 the value of an unexpired term or interest for at least one year, based on loss of profit rental value and loss of profits.
Where the case is referred to the Lands Tribunal, the effective date will be the first renewal date after the Lands Tribunal decision.

Amendment agreed to.

Amendments made: No. 79, in page 52, line 29 leave out from 'interest' to end of line 32 and insert:
'in, or in any of, the part of the holding to which the notice of entry did not relate ("the land not acquired")—'

No 80, in line 35, leave out 'relevant par' and insert 'land not acquired'.

No. 81, in line 35, leave out 'relevant part' and insert 'land not acquired'.

No. 82, in line 39, leave out 'part' and insert 'land'.

No. 83, in page 53, line 10, leave out 'relevant part' and insert 'land not acquired'.—[Mr. Eldon Griffiths.]

Clause 49

OTHER PROCEDURES FOR TAKING POSSESSION OF PART OF AGRICULTURAL HOLDING

Amendments made: No. 84, in page 53, line 33, at end insert:

'(2) Sections 47 and 48 above shall have effect, subject to any necessary modifications, in relation to a notice of entry under paragraph 4 of Schedule 6 to the New Towns Act 1965 (provisions applicable to compulsory acquisitions under that Act) as they have effect in relation to a notice of entry under section 11(1) of the said Act of 1965'.

No. 85, in page 54, line 5, at end insert:
'(4) Sections 47 and 48 above shall have effect subject to any necessary modifications, in relation to a notice of entry under paragraph 4 of Schedule 6 to the New Towns (Scotland) Act 1968 (provisions applicable to compulsory acquisitions under that Act) as they have effect in relation to a notice of entry under paragraph 3 of Schedule 2 to the Acquistion of Land (Authorisation Procedure) (Scotland) Act 1947'.—[Mr. Eldon Griffiths.]

Clause 51

NOTICE TO QUIT AGRICULTURAL HOLDING: RIGHT TO OPT FOR NOTICE OF ENTRY COMPENSATION

Amendments made: No. 86, in page 55, line 38, leave out from 'if' to end of line 3 on page 56 and insert:
'the notice to quit had not been served and the acquiring authority had taken possession of the holding in pursuance of a notice of entry under section 11(1) of the said Act of 1965 on the day before that on which the tenancy terminates in accordance with the notice to quit and—
(b) the provisions of the Agricultural Holdings Act 1948 relating to compensation to a tenant on the termination of his tenancy and sections 9 and 15(2) of the Agriculture (Miscellaneous Provisions) Act 1968 (additional payment and compensation in cases of notice to quit) shall not have effect in relation to terminaton of the tenancy by reason of the notice to quit.
(2A) No election under subsection (2) above shall be made or, if already made, continue to have effect in relation to any land (whether the whole or part of the land to which the notice to quit relates) if, before the expiration of that notice, an acquiring authority take possession of that land in pursuance of an enactment providing for the taking of possession of land compulsorily.'.—[Mr. Eldon Griffiths.]

Clause 52

NOTICE TO QUIT AGRICULTURAL HOLDING: RIGHT TO SERVE COUNTER-NOTICE UNDER SECTION 47

Amendments made: No. 87, in page 56, line 21, after '47(1)', insert 'and (3)'.

Amendment No. 88, in line 25, at end insert:
'(3) Where an election under section 51 above ceases to have effect in relation to any land by


virtue of subsection (2A) of that section any counter-notice served by virtue of this section shall also cease to have effect in relation thereto'.—[Mr. Eldon Griffiths.]

Clause 60

LAND AFFECTED BY ORDERS RELATING TO NEW TOWNS

Mr. Terry Davis: I beg to move Amendment No. 89, in page 62, line 30, leave out subsection (6).
The Bill extends the rights of citizens to receive compensation in a number of cases and at first sight subsection (6) also extends citizens' rights. As I understand the provision, it would not be necessary any longer for people who live in a designated area of a new town to wait for seven years after the designation order before they can obtain the purchase of their property. That would be a welcome improvement in the law for people who are living in new towns which have been recently established. I am concerned about the effect of the Bill on people who live in the new towns which were established more than seven years ago. As Ministers will be aware, there is a new town, Redditch, in my constituency. The effect of this clause has been drawn to my attention by the urban district council, with which I have had correspondence.
There are two main areas of concern. The first is the extent of the right to obtain the purchase of property by a development corporation. Earlier we had a debate on an Amendment to Clause 20 when the Minister said that he was very reluctant to create a right to compel a highway authority to purchase someone's property seriously affected by a new road or improvement. In the case of new towns this right already exists. Indeed, the citizen's right goes much further. He does not have to prove that his property has been or will be adversely affected; the designation of a new town is sufficient. In effect there is a guaranteed market. As the Bill is drafted, those people will lose their right. They will be able to serve a blight notice but this procedure has a major weakness because the citizen must prove blight.
I hope that the Minister will give an assurance that in practice the Government do not intend to introduce any change.

In other words, I am asking the Minister to confirm that new town designation orders will be automatically regarded as proof of blight and that new town development corporations will not serve counter-notices. I should perhaps say that I have already had a similar assurance from the hon. Member for Birmingham, Hall Green (Mr. Eyre), the Under-Secretary of State for the Environment in a letter, but I have also received a letter from the general manager of the Redditch Development Corporation, who appears to have a different interpretation of the Government's intentions. This is very important for people in new towns.
My second point concerns the sort of landowners who are entitled to serve blight notices on a new town corporation. The existing right is universal; anyone can compel the corporation to buy. This subsection would restrict the right to owner-occupiers of houses, owners of small businesses and agricultural interests. I should be grateful if the Minister could explain how small businesses are defined, and I should also like to know why the Government want to exclude larger firms and other bodies such as social clubs and churches. I have put these questions in a letter to the Department, but I have not yet received a reply. If we do not receive a reply this evening, it will be too late.

Mr. Mulley: I rise only to support the case put by my hon. Friend the Member for Bromsgrove (Mr. Terry Davis) and commend him on his great patience and forbearance in having sat through six hours of debate waiting to make this very important point on behalf of his constituents. I am sure that the Minister will seek to meet it if he can.

Mr. Graham Page: The effect of this Amendment would be to omit from the Bill the proposed repeal of Section 11 of the New Towns Act 1965. That repeal we intend as part of a package which would extend the general planning blight provisions. By the Bill we are introducing at least half a dozen more cases in which purchase notices can be served, but we are extending the blight provisions to all inhabitants of a new town.
Section 11 enables any owner of land in a new town to require the corporation


to acquire his land at any time from seven years after making a designation order. As things stand, after that seven years he does not need to prove the occasion of blight as any other owner would have to do, but until the seven years is up he has no right to serve the notice. It is that section which we shall repeal with the intention of putting owner-occupiers of houses and small businesses on exactly the same footing as any other person.
2.45 a.m.
The provisions of Section 11 as they stand are very wide, applying to all owners of land, with no requirement to prove blight and no "counter-notice" procedure. The new town development corporations have over the years criticised the wide liability that this has imposed upon them, while on the other hand property owners have been critical that they have had to wait seven years before being able to require the corporation to buy.
This is a form of compromise to try to please both sides. We are giving a freedom to serve purchase notices if the house owner or small business owner is blighted during those seven years, and at the same time restricting the possibility of the corporation being forced to buy for any cause, or no cause, after seven years have elapsed.
The extension of the blight code to new towns by Clause 60 means that the people most likely to be seriously affected by blight in new town designated areas—this is to say owner-occupiers of houses, small businesses and agricultural interests—will have much earlier blight cover than before. They will not have to wait seven years. They will have the same cover as any other person outside the new town. On the other hand, the repeal of Section 11 will take away the existing right of landowners of properties outside those categories to require their purchase by a development corporation.
We are depriving certain owners who have had a right previously—a right which is exceptional to them—but we are giving the ordinary dwellinghouse owner, small business owner and agricultural owner the right to serve blight notices at any time during those seven years after the designation of an area. This is a package deal and I think that it will bring

satisfaction all round, although in any compromise of this sort there may be some who feel hard done by because they may have just been going to take advantage of some benefit which they had under Section 11.
The hon. Gentleman asked whether a new town order would itself be a blight, and whether there would be a prohibition of counter-notices. If the new town order indicates compulsory purchase of the property, it will give rise to an entitlement to a purchase notice, but because we are putting the landowner in a new town on the same footing as anyone else in the country a new town commission will be entitled to serve a counter-notice. It would not be precluded from serving a counter-notice as it is now for seven years after designation. For a small business this is the same as in all the rest of the blight provisions. For the owner-occupier business with a rateable value of £750 we shall be bringing in an order to fit it in with the new revaluation list.

Mr. Terry Davis: I am disappointed with the Minister's reply. The right hon. Gentleman described this as a package deal and said that some people will feel hard done by.
It is not a compromise even between residents in one town or between interests in one town. This is a situation where some people who live in new towns which have been established more than seven years are losing certain rights. No one else in the town gains, except the development corporation, and the development corporation is the Department of the Environment wearing another hat. Other people living in newer new towns will gain because they will not have to wait for seven years before requiring the development corporation to purchase their properties. But that is no offset. That is not a package deal.
Who was consulted about this compromise? The Minister did not say that there was any consultation with the Urban District Councils Association. The Redditch Urban District Council wrote to the Department and received a reply which did not go into the detail that we have had tonight. If it had not been for the attention given to the White Paper by a local government officer employed by Redditch Urban District Council, this would not have been unfolded in the


House at all and the Government would not have come clean.
The Minister did not say why the Government wished to make the change. I applaud the Minister's desire to improve the situation for people in recently established new towns. I am sure that both sides of the House will agree with that aim. But the right hon. Gentleman has not explained why it is felt necessary to diminish the right of people living in older new towns. He used the word "deprived" of an existing right, and I am disappointed that he is not able to look again at the situation.
The right hon. Gentleman has perhaps confused the position a little when saying that people whose properties are affected by a designation order will be able to adduce the designation order as evidence of blight. In most cases a designation order is a very broad brush order. It does not indicate that an individual house, social club, church or company's premises will be required. As I understood what the Minister said, the social clubs, churches and larger businesses in the new towns will be disadvantaged compared with the present situation.
If it were not so late, I could tell the right hon. Gentleman about several social clubs in my constituency which are very worried about the future. Now we have the news that they are not going to have the right to require the development corporation to purchase their old premises when they have been encouraged by the corporation to build new properties elsewhere only to find that the corporation's proposals have changed. The Minister's announcement will come as bad news to those who run these clubs. In my experience, a development corporation's specific proposals change from time to time. I have known the lines of roads to be moved after the original scheme has been put forward.
I repeat that I am disappointed in the Minister's response. I hope that he will look at the situation again and consult the urban district councils which are affected—those who represent the new

towns. It appears that he has only consulted the development corporations.

Mr. Graham Page: I willingly give that assurance. I wish to let the clause stand as it is at the moment. But the hon. Gentleman has raised many points. I think that I was right in my explanation, but it was an explanation and perhaps not a justification. Therefore I will look at his points.

Mr. Terry Davis: I thank the Minister for that assurance. I am grateful to him, and I look forward with pleasure to his reconsideration.

I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 68

EFFECT OF BLIGHT NOTICE REQUIRING PURCHASE OF WHOLE AGRICULTURAL UNIT

Amendment made: No. 91, in page 69, line 23, leave out '57' and insert '66'.—[Mr. Graham Page.]

Clause 71

APPLICATION TO CROWN

Amendment made: No. 95, in page 70, line 15, leave out 'relevant' and insert 'responsible'.—[Mr. Graham Page.]

Clause 74

GENERAL INTERPRETATION

Amendments made: No. 96, in page 71, line 4, at end insert:
'and "landlord", "tenant" and "notice to quit" in relation to an agricultural holding, have the same meaning as in those Acts respectively'.

No. 97, in line 29, after 'Wales', insert
'and otherwise than in relation to an agricultural holding'.

No. 98, in line 38, leave out '21 and' insert 'to'.—[Mr. Graham Page.]

Clause 75

SHORT TITLE, COMMENCEMENT AND EXTENT

Amendments made: No. 99, in page 72, line 6, leave out subsection (3) and insert—
'(3) Section (Compensation in respect of agricultural holdings) above does not affect any compensation which fell or falls to be assessed by reference to prices current on a date before the passing of this Act, and the other provisions of Part IV of this Act relating to assessment of compensation do not affect any compensation which fell or falls to be assessed by reference to prices current on a date before 17th October 1972'.

No. 100, in line 10, after 'Act', insert 'except section (Northern Ireland)'.—[Mr. Graham Page.]

1968 c.
34.
The Agriculture (Miscellaneous Provisions) Act 1968.

Motion made, That the Bill be now read the Third time. [Queen's Consent, on behalf of the Crown, and Prince of Wales's Consent signified.]

Question put forthwith pursuant to Standing Order No. 56 (Third Reading), and agreed to.

Bill accordingly read the Third time and passed.

ADJOURNMENT

Motion made, and Question proposed, That this House do now adjourn.— [Mr. Murton.]

EDUCATION (BOLTON)

2.52 a.m.

Mr. Laurance Reed: Despite the lateness of the hour, I am grateful to Mr. Speaker for choosing this topic for the Adjournment tonight. Education is a key issue in my constituency, because the question whether Bolton should go comprehensive has been debated and discussed in our town for the best part of a decade.
People in Bolton are proud of the academic achievements of their five direct grant schools and they take equal pride in the success of their secondary base

Schedule 1

APPLICATION OF PART V TO SCOTLAND

Amendments made: No. 101, in page 75, line 44, after 'land', insert 'or of the rights in or over the land'.

No. 102, in page 78, leave out lines 8 to 14.—[Mr. Graham Page.]

Schedule 2

REPEALS

Amendment made: No. 104, in page 84, line 53, at end insert:
Sections 15(1) and 42 except in relation to compensation falling to be assessed by reference to prices current on a date before the passing of this Act and except for the purposes of section (Compensation in respect of agricultural holdings) (6) of this Act'.—

[Mr. Graham Page.]

school system. That system is largely unique. When introduced in 1947 it was looked upon by the education world as a major innovation. It provides several schools on one campus, each with its own headmaster. At present there are four such bases, comprising five grammar schools and five high schools. Another base is about to be built and a sixth is planned. Many teachers believe that this model combines some of the best features of comprehensives while avoiding some of the worst. About one-third of all the children of secondary school age go to one of 10 establishments enjoying grammar school status. Nearly 18 per cent. reach sixth form and over 8 per cent. go to university.

In the latest edition of Where? a Dr. Midwinter has an article which suggests that there is a strong correlation between social class and entry to sixth forms and universities. He says:
A couple of freak results apart, you tell me the social class composition of a given county borough and I will tell you within a few percentage points how many of its children are in sixth form and how many are in university.
We do not consider ourselves to be freaks, but it would appear that we are in a class of our own, because Bolton is doing better academically than this sociologist calculates we should. According to Dr. Midwinter we rank sixty-ninth out of 103


county boroughs in social class but twenty-seventh on university places—clear testimony to the success of the present pattern of secondary education.

Conservatives do not believe that this pattern is perfect but they prefer to build on something tried and proved rather than to embark upon wholesale reorganisation. The Labour Party in Bolton, on the other hand, favours comprehensives through and through, some for educational and some for political reasons. The Labour Party has campaigned for it at successive local elections and gave the go-ahead after its victory last year. A working party was set up and after seven months' deliberations it has now published an interim report. During this time there has been consultation with teachers, school governors and the Roman and Anglican Churches.

My right hon. Friend the Secretary of State has specifically asked that full opportunities should be given to parents to make their views known before decisions are reached. It was with this request in mind that my hon. Friend the Member for Bolton, West (Mr. Redmond) and myself went to see Lord Belstead at the Department of Education last summer. At the time we were accused by our opponents of reneging on our undertaking that these matters should be settled locally. That charge is without substance, because the very purpose of our visit was not to ask the Minister to override local wishes but to ensure that consultation with parents and other interested parties was both open and meaningful.

Such accusations do not come well from those who have spent the last few years endeavouring to force comprehensiveness upon us whether we want it or not and who are now proposing to remove the whole educational function away from metropolitan Bolton and to pass it to Greater Manchester.

Before I come to the proposals in the interim report, I wish to impress on my hon. Friend how unseasonable they are, both with regard to the imminent changes in local government and in relation to other educational priorities in our town. In a few weeks we shall have elections based upon the new metropolitan district, and just over a year from now there will be one authority, one policy and one

budget, not just for Bolton but for Turton, Kearsley, Horwich, Westhoughton, Farnworth, Little Lever and Blackrod. Our new partners will want to have a say in the way in which the funds are to be spent.

I am sure that it makes sense to base future plans on the total resources available in the new metropolitan district. Catchment areas for the comprehensives must be drawn to take account of the needs of the new authorities with which we are about to be united. Links between Horwich and Heaton, and Turton and Astley Bridge, suggest themselves. This is self-evident, and I find it extremely unsatisfactory that all the calculations and figures in this report are founded exclusively on present-day boundaries. Only the Roman Catholic authorities seem to be taking the overall view. The working party itself has had no consultation with neighbouring authorities about their plans, and this fact alone must cause doubt on the validity of their findings.

In Bolton we have 29,000 children of school age; 10,250 are in secondary schools and 18,500 are in primary schools. The spending per pupil at the secondary stage is £211 a year; at the primary stage it is £101 per year. In the secondary schools there are 17 children for every full-time teacher, and in the primary schools 28 pupils per full-time teacher.

I turn again to the magazine Where? Last December it published a table showing how much the local education authorities spend on teachers' salaries. Bolton is 33rd out of 103 county boroughs in secondary spending, but right down at 96th place in primary school spending. The editor says that the difference in figures reflects a decision on the part of authorities to discriminate in favour of secondary education, and he asks the question:
Are local education authorities cheating their primary children?
I believe that we would be cheating them and that the money, time and effort spent on reorganisation along comprehensive lines would be better devoted at this stage to upgrading our primary schooling.

There is also the matter of nursery schools. In Bolton just over 1,000 pupils are enjoying the privilege of some kind of nursery education. Actually there are 190 children in nursery schools proper.


This is about one-fifth of the potential number—not much in a town where so many mothers go out to work.

The proposals outlined in my right hon. Friend's White Paper have been widely praised in our area. The social and educational case for these is well known. If the home environment is as important to the life opportunities of an individual child as sociologists believe, nursery provision at 3 and 4 years will do far more for equality of opportunity than any amount of restructuring at a later stage.

I contend that it is not possible to consider secondary reorganisation isolated or divorced from other educational needs because going comprehensive will cost money. How much we cannot tell until we are given firmer proposals than those now presented to us. Achieving parity of esteem between different schools, forgoing—if that is the intention—places in the direct grant schools, and the construction of a special sixth form college could be expensive. Education already accounts for 50 per cent. of the budget, and after local government changes it will be as much as 80 per cent., remembering that some functions pass to Manchester.

I doubt whether it will be politically feasible to burden ratepayers still further. If that view is correct, the cost of going comprehensive can only be at the expense of nursery and primary schools, or even adult education—a result that contradicts Government policy. I do not expect the Labour group in Bolton to agree with my priorities, but I should have expected the group, in submitting its proposals to the parents and ratepayers of the town, to have argued the case for comprehensives in terms of our overall educational requirements, and that is something that the group has not done.

I come to the report itself. After considering four possible alternatives, the working party came down in favour of two—all-through comprehensives, 11–18, or a two-tier scheme with a break at sixth form level. I favour the latter, as it postpones selection until it occurs de facto by the children deciding either to leave school or to go on with their education. Apparently, about 1,000 places will be needed at sixth form level, and it is suggested that two colleges could

be formed on two of the existing bases. This idea, however, conflicts with the principle of parity, as it would tend to favour the 11–16 elements on those bases where sixth forms were housed. I am sure that parents and teaching staffs would regard those bases as superior.

It is for this reason that the teachers themselves prefer that there should be sixth form provision at all the comprehensives. My own choice would be for a single purpose-built college. This idea has the virtue of concentrating in one institution the scarcest of all educational resources—specialised staff—as well as producing returns to scale on libraries, laboratories and equipment. It would also provide a concentrated and stimulating environment for young people that was less that of the school room and more that of the college.

As to the size of schools; my hope would be that small schools would be favoured. Many children benefit and prosper within the atmosphere of a smaller community. This can be more important than providing ever-widening course options.

One of the most difficult problems, as the report readily appreciates, is what to do with the non-base high schools. At present there are six, but it is possible to envisage that three will close in the fairly near future. We should still be left with Castle Hill, Whitecroft and Tonge. They are too small to function on their own and they are geographically distant from the bases with which it is proposed they should be linked.

I am mindful of my right hon. Friend's observations at the NUT conference last year about the problems created by split premises. She said
… it is, I believe, for local education authorities to demonstrate that such arrangements will work, without unreasonable difficulty, and that the educational advantages outweigh the obvious drawbacks".
Parents are likely to regard these schools as inferior to those on the base, and to feel that their children are disadvantaged. To overcome this, the report advocates transfer to a base at 14. Yet this two-tier pattern was specifically rejected in the report as being educationally unsound when the group was considering reorganisation as a whole.

Again, the observations of my right hon. Friend the Secretary of State are pertinent:
In looking at such proposals I have found myself worrying a good deal about the continuity of education between separate schools and, in general, I am reluctant to see the introduction of arrangements based on transfer at 14".
The vital issue as to how children are to be selected for the different establishments is glossed over in the report. Banding is rejected because of the "bussing" around the town that it would entail.

We are told that alternatives based on geographical zones or contributory primary schools are being considered, but parents cannot be expected to pass a verdict on abstract notions of how seletion might be done. What they want to know is where their own child will end up.

The report is non-committal about the direct grant schools. I understand the local Labour group's embarrassment, but it must come clean about this. The LEA provides places for 1,328 pupils in these schools. Are they to be used in future? Time and again we have heard from hon. Gentlemen opposite that it is not just comprehensive schools that they want, but a comprehensive system of education. As the Shadow Minister said in the debate at the beginning of this month,
A true comprehensive system and the complete abolition of selection are indivisible"—[OFFICIAL REPORT, 1st February, 1973; Vol. 849, c. 1639.]
The teacher's panel in Bolton share that view and suggest that entrants to the direct grant schools should represent the complete spread of ability.

I understand that the Roman Catholic authorities are prepared to co-operate in bringing their two direct grant schools into any new arrangements, provided that some degree of parental choice remains. But the Bolton school wants to maintain selection in some form. It is prepared to admit free place holders at 11 provided that the pupils are not
obviously unlikely to profit from the educational courses and facilities offered by the school.

Is this formula acceptable? If not, then more than just the places at Bolton School or even Canon Slade will be at stake. The Catholic authorities have made it plain that their co-operation in

any scheme of reorganisation will be entirely dependent upon a situation in which the local authority no longer takes up selection places in the other non-Catholic direct grant schools.

If this document is nothing more than an attempt to get a public debate going in our town, I welcome it, but if it is being seriously advanced as the fulfilment of an obligation to consult parents, upon which they can be expected to pass a judgment at local election time, I must advise my hon. Friend that it can be considered as no such thing. Too many questions remain unasked and unanswered for anybody to be able to form a clear opinion or judgment.

I believe that Bolton should, without more ado, get together with its neighbours and draw up a long term education plan for the new metropolitan district as a whole—not just secondary schooling, but right through from nursery provision to university entrance. If, after establishing the new priorities, secondary education reorganisation is still thought to be desirable, let us have some clear answers to the substantive issues involved.

What is the future of the direct grant schools? How will children be selected for different establishments and how will this be squared with parental choice? How will parity of esteem be achieved in practice, with particular regard to the non-base high schools? What practical measures will be taken to minimise the disruption necessarily involved in any changeover? What are the implications for the jobs and status of teaching staff?

These are the questions that I am asking. These are the issues I shall be asking my right hon. Friend to scrutinise with the utmost care when considering any proposals that may be submitted to her.

3.12 a.m.

Mr. Robert Redmond: I join my hon. Friend the Member for Bolton, East (Mr. Laurance Reed) in expressing concern about this matter, but at the same time we both want full consultation with parents and teachers. Did my hon. Friend see a recent report in the Bolton Evening News which showed that a school in Westhoughton—a district coming within the new metropolitan district—had gone comprehensive and the parents did not know about it?


It is an alarming statement when my hon. Friend and I are trying to get the parents of Bolton to tell us what they think so that we may be able to convey their messages to the Secretary of State. I hope that the Under-Secretary of State, when he replies to the debate, will mention that very alarming fact.

3.13 a.m.

The Under-Secretary of State for Education and Science (Mr. Norman St. John-Stevas): I am grateful to my hon. Friend the Member for Bolton, East (Mr. Laurance Reed) for raising this particular subject at this time. I know the great personal interest that he has taken in the educational system in Bolton, of which he is justly proud.
Both he and my hon. Friend the Member for Bolton, West (Mr. Redmond), who has been present throughout the debate, have made notable contributions to the discussion of educational issues in Bolton.
I understand, as my hon. Friend has made clear, that the plan for reorganisation of secondary schools in Bolton is a preliminary document which has been circulated for general discussion by all interested parties and that it has also been publicised in the Press.
I understand further from my hon. Friend that the document, after discussing various possible schemes, tended, if any reorganisation were to take place, to favour either "all-through" 11–18 year old comprehensive schools or 11–16 schools with some separate sixth form college provision. I have no doubt, particularly after hearing my hon. Friend's remarks, that this will give rise, as it certainly should, to much local debate. My hon. Friend has performed an important public service in raising this issue today.
My right hon. Friend does not comment on any non-statutory plans, whether in preliminary or final form, for the reorganisation of secondary education in any particular area. I must follow her example in this. This is because any such comments could be held to prejudge any decisions that she may be called upon to make on any specific proposals for schools which may be submitted to her under Section 13 of the 1944 Education Act, as amended. This could therefore lead to confusion about the legal

basis under this section of the Act on which alone decisions can be given.
It will at present be for the Bolton Education authority to decide, if and when it considers that it has received full comments on its preliminary plan from all interested parties, whether it wishes to proceed with working out fuller plans for secondary reorganisation. Before any plans could be translated into action, however, it would be necessary for Bolton to submit further proposals under Section 13, each one related to a specific school.
Under Section 13 the authority would also have to give public notice of its proposals, and the Act provides for a two-months' period following publication during which the managers or governors of any voluntary school affected by the proposals or any 10 local government electors for the areas concerned or any local education authority concerned may submit objections to my right hon. Friend. Her duty then is to reach decisions on the proposals on their merits and taking into account any objections which are made.
It may, however, be helpful to my hon. Friend if I mention some of the various principles which will guide my right hon. Friend in reaching any decisions which she may be called upon to make. My Department's Circular 10/70 advised local education authorities and other bodies that educational consideration in general, local needs and wishes in particular and the wise use of resources are expected to be the main principles determining the local pattern.
The circular also stressed that where a particular pattern of organisation is working well and commands general support my right hon. Friend does not wish to cause change without good reasons. It went on to say that the Secretary of State would expect any local education authority which was thinking of proposing any changes in the local pattern to maintain close liaison with those representing the denominational and other voluntary schools in the area. As my hon. Friend has stressed, denominational education has a special place in the Bolton area.
Again, the Secretary of State will expect full opportunity to be given to parents to make their views known before


decisions are reached about the form of any proposals.
There is one other point that I should mention, in view of the anxiety that my hon. Friend has expressed about the need to consider any plans within the general context of the educational system of the new metropolitan district.
My Department's recent Circular 1/73, entitled "Reorganisation of Local Government: The Education Function" said, in relation to any proposals under Section 13 of the Education Act 1944, that the Secretary of State will expect the existing and the new local education authorities to examine together the implications and the timing of all current proposals under Section 13. If any of Bolton's plans are eventually translated into statutory proposals under Section 13, therefore, they will have to be considered in the context of the new district and in the light of the consultations that have been carried out with all interested parties in that district. I would therefore expect that Bolton would be taking all this into account when considering the nature and timing of any plans or eventual statutory proposals that it may wish to make.
For the reasons I have given earlier this morning, I am not in a position to comment on the merits or otherwise of the points raised by my hon. Friend

the Member for Bolton, East. Nor can I comment directly on the important point raised by my hon. Friend the Member for Bolton, West (Mr. Redmond) concerning Westhoughton and the situation there. I have, however, noted that very important point, as well as the other points raised in this short debate.
I hope that both my hon. Friends will be assured that the provisions of the Education Act 1944 and the policy of the Secretary of State, as I have outlined it in the debate, in considering statutory proposals for the reorganisation of secondary schools, will together help to alleviate some of the anxiety which they have expressed about the future of secondary education in the district.
The debate has been of very great importance to the people of Bolton. We in the Department appreciate very much the public spirit which my hon. Friends the Members for Bolton, East and Bolton, West—particularly the former—have shown in raising this subject in the House. I assure my hon. Friend the Member for Bolton, East that the extremely important points that he has raised will be fully considered within the Department, and I am sure that they will give rise to a wide-ranging local debate in Bolton.

Question put and agreed to.

Adjourned accordingly at twenty-two minutes past Three o'clock a.m.